Despite headlines suggesting otherwise, the data shows that the housing market isn’t headed for a crisis. Yes, foreclosure activity is rising, but it’s not as extreme as it was during the housing crash in 2008. In this blog post, we will take a closer look at the foreclosure activity trends since the pandemic hit, explore some visual data to help highlight this trend, and discuss the reasons why American homeowners have better equity in their homes now than in the past.
n recent years, the number of foreclosures has been very low due to the forbearance program and other relief options put in place to help many homeowners stay in their homes during the tough time of the pandemic. While foreclosure filings are inching back up to pre-pandemic numbers, they’re still lower than when the housing market crashed in 2008. According to research from ATTOM, a property data provider, there have been fewer foreclosures since the crash. This data is depicted in the graph below, which looks at properties with a foreclosure filing going all the way back to 2005.
As you can see, the number of foreclosures was highest in 2010 and 2011, but since 2012, the number of filings has declined steadily. While Covid-19 has contributed to a rise in foreclosure activity, it’s still not where it was 13 years ago. Also, the tremendous amount of equity American homeowners have in their homes can help people sell and avoid foreclosure. This equity provides options for homeowners who may be struggling to make mortgage payments.
The financial trouble many industries and small businesses felt during the pandemic didn’t cause a dramatic increase in bankruptcies. Still, the number of bankruptcies has gone up a bit since last year, nearly returning to 2021 levels. However, the numbers for 2020 and 2021 were lower than more typical years, thanks to the government’s provision of trillions of dollars in aid to individuals and businesses during the pandemic. According to an article by Forbes, the recent increase in bankruptcies has mostly been in small businesses that were hit hard by Covid restrictions, rather than individuals.
Another important factor contributing to the housing market’s stability is the low mortgage rates. Low-interest rates have played a significant role in keeping the housing market relatively stable over the past two years. Mortgage rates have been at historic lows, helping homeowners to reduce their monthly mortgage payments, and driving more people to buy homes, thus increasing the demand and prices for homes.
The data shows that while foreclosure activity is rising, it’s still less than the peak levels during the housing crash in 2008. This suggests that homeownership remains a relatively stable investment since the forbearance program and other relief options are protecting homeowners from foreclosure. Additionally, the increase in American homeowners’ equity gives them the flexibility to sell their homes or use it as collateral in difficult situations. Lastly, low mortgage rates have also contributed significantly to stability in the housing market. While we cannot predict the future, it’s good to know that the housing market is in a far better position than it was in 2008.