The rising cost of just about everything from groceries to gas right now is leading to speculation that more people won’t be able to afford their mortgage payments. And that’s creating concern that a lot of foreclosures are on the horizon. While it’s true that foreclosure filings have gone up a bit compared to last year, experts say a flood of foreclosures isn’t coming.
Take it from Bill McBride of Calculated Risk. McBride is an expert on the housing market, and after closely following the data and market environment leading up to the crash, he was able to see the foreclosures coming in 2008. With the same careful eye and analysis, he has a different take on what’s ahead in the current market:
“There will not be a foreclosure crisis this time.”
Let’s look at why another flood is so unlikely.
One of the main reasons there were so many foreclosures during the last housing crash was because relaxed lending standards made it easy for people to take out mortgages, even if they couldn't show that they’d be able to pay them back. At that time, lenders weren’t being very strict when assessing applicant credit scores, income levels, employment status, and debt-to-income ratio.
But now, lending standards have tightened, leading to more qualified buyers who can afford to make their mortgage payments. And data from Freddie Mac and Fannie Mae shows the number of homeowners who are seriously behind on their mortgage payments is declining (see graph below):
Molly Boese, Principal Economist at CoreLogic, explains just how few homeowners are struggling to make their mortgage payments:
“May’s overall mortgage delinquency rate matched the all-time low, and serious delinquencies followed suit. Furthermore, the rate of mortgages that were six months or more past due, a measure that ballooned in 2021, has receded to a level last observed in March 2020.”
Before there can be a significant rise in foreclosures, the number of people who can’t make their mortgage payments would need to rise. Since so many buyers are making their payments today, a wave of foreclosures isn’t likely.
If you’re worried about a potential flood of foreclosures, know there’s nothing in the data today to suggest that’ll happen. In fact, qualified buyers are making their mortgage payments at a very high rate.
The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. The Home Run Team, Ltd. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. The Home Run Team, Ltd. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.
Here are three reasons why homeowners feel thankful for their homes.
Countless people have set out on the exciting journey of homeownership. Ask around and you’ll find the vast majority are thankful they took the leap and bought a home.…
Home price appreciation is returning to normal seasonality and that’s a good thing.
If you’re looking to make a move, you want to be sure you have the latest information on the housing market.
There are plenty of good reasons to put your house on the market during the holiday season.
Thinking of buying or selling a house and wondering what the new year holds for the housing market?
You might think there aren’t many people buying or selling homes right now since affordability is tighter than it’s been in quite some time, but that’s not the case.
The new year is right around the corner, and you might be wondering if 2024 will be the right time to buy or sell a home.
If you delayed moving because you were concerned home prices would drop, don't worry – the numbers show they're going up nationally.
We're fortunate to be able to do what we want to do every day, and what we want to do is help clients live a better, more secure life. Whether you're buying a home, looking to sell or relocate, or are an investor, we can help you. No agents will work harder for you, because to us, going to bat for you, isn't work. That's just what you do when you're a team.