Why There Won't Be a Flood of Foreclosures Coming to the Housing Market
Why There Won’t Be a Flood of Foreclosures Coming to the Housing Market With the rapid shift that’s happened in the housing market this year, some people are raising concerns that we’re destined for a repeat of the crash we saw in 2008. But in truth, there are many key differences between what’s happening today and the bubble in the early 2000s. One of the reasons this isn’t like the last time is the number of foreclosures in the market is much lower now. Here’s a look at why there won’t be a wave of foreclosures flooding the market. Not as Many Homeowners Are in Trouble This Time After the last housing crash, over nine million households lost their homes due to a foreclosure, short sale, or because they gave it back to the bank. This was, in large part, because of more relaxed lending standards where people could take out mortgages they ultimately couldn’t afford. Those lending practices led to a wave of distressed properties which made their way into the market and caused home values to plummet. But today, revised lending standards have led to more qualified buyers. As a result, there are fewer homeowners who are behind on their mortgages. As Marina Walsh, Vice President of Industry Analysis at the Mortgage Bankers Association (MBA), says: “For the second quarter in a row, the mortgage delinquency rate fell to its lowest level since MBA’s survey began in 1979 – declining to 3.45%. Foreclosure starts and loans in the process of foreclosure also dropped in the third quarter to levels further below their historical averages.” There Have Been Fewer Foreclosures over the Last Two Years While you may have seen recent stories about the number of foreclosures rising today, context is important. During the pandemic, many homeowners were able to pause their mortgage payments using the forbearance program. The program gave homeowners facing difficulties extra time to get their finances in order and, in many cases, work out a plan with their lender. With that program, many were concerned it would result in a wave of foreclosures coming to the market. That fear didn’t materialize. Data from the New York Fed shows there are still fewer foreclosures happening today than before the pandemic (see graph below): That means, while there are more foreclosures now compared to last year (when foreclosures were paused), the number is still well below what the housing market has seen in a more typical year, like 2017-2019. And most importantly, the number we’re seeing now is still far below the number we saw during the market crash (shown in the red bars in the graph). The big takeaway? Don’t let a headline in the news mislead you. While foreclosures are up year-over-year, historical context is essential to understanding the full picture. Most Homeowners Have More Than Enough Equity To Sell Their Homes Many homeowners today have enough equity to sell their homes instead of facing foreclosure. Due to rapidly rising home prices over the last two years, the average homeowner has gained record amounts of equity in their home. And if they’ve stayed in their homes even longer, they may have even more equity than they realize. As Ksenia Potapov, Economist at First American, says: “Homeowners have very high levels of tappable home equity today, providing a cushion to withstand potential price declines, but also preventing housing distress from turning into a foreclosure. . . the result will likely be more of a foreclosure ‘trickle’ than a ‘tsunami.’” A recent report from ATTOM Data explains it by going even deeper into the numbers: “Only about 214,800 homeowners were facing possible foreclosure in the second quarter of 2022, or just four-tenths of one percent of the 58.2 million outstanding mortgages in the U.S. Of those facing foreclosure, about 195,400, or 91 percent, had at least some equity built up in their homes.” Bottom Line If you see headlines about the increasing number of foreclosures today, remember context is important. While it’s true the number of foreclosures is higher now than it was last year, foreclosures are still well below pre-pandemic years. If you have questions, Jennifer Schurter, a Realtor in the Portland, Oregon metro area, is happy to answer them!
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3 Ways You Can Use Your Home Equity
3 Ways You Can Use Your Home Equity If you’re a homeowner, odds are your equity has grown significantly over the last few years as home prices skyrocketed and you made your monthly mortgage payments. Home equity builds over time and can help you achieve certain goals. According to the latest Equity Insights Report from CoreLogic, the average borrower with a home loan has almost $300,000 in equity right now. As you weigh your options, especially in the face of inflation and talk of a recession, it’s important to understand your assets and how you can leverage them. A real estate professional is the best resource to help you understand how much home equity you have and advise you on some of the ways you can use it. Here are a few examples. 1. Buy a Home That Fits Your Needs If you no longer have the space you need, it might be time to move into a larger home. Or it’s possible you have too much space and need something smaller. No matter the situation, consider using your equity to power a move into a home that fits your changing lifestyle. If you want to upgrade your house, you can put your equity toward a down payment on the home of your dreams. And if you’re planning to downsize, you may be surprised that your equity may cover some, if not all, of the cost of your next home. A real estate advisor can help you figure out how much equity you have and how you can use it toward the purchase of your next home. 2. Reinvest in Your Current House According to a recent survey from Point, 39% of homeowners would invest in home improvement projects if they chose to access their equity. This is a great option if you want to change some things about your living space but you aren’t ready to make a move just yet. Home improvement projects allow you to customize your home to suit your needs and sense of style. Just remember to think ahead with any updates you make, as some renovations add more value to your home and are more likely to appeal to future buyers than others. For example, a report from the National Association of Realtors (NAR) shows refinishing or replacing wood flooring has a high cost recovery. Lean on a local professional for the best advice on which projects to invest in to get the greatest return on your investment when you sell. 3. Pursue Your Personal Goals In addition to making a move or updating your house, home equity can also help you achieve the life goals you’ve dreamed of. That could mean investing in a new business venture, retiring or downsizing, or funding an education. While you shouldn’t use your equity for unnecessary spending, leveraging it to start a business or putting it toward education costs can help you achieve other lifelong goals. Bottom Line Your equity can be a game changer. If you’re unsure how much equity you have in your home, talk to Jennifer Schurter, a Realtor in the Portland, Oregon metro area, so you can start planning your next move.
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Your House Could Be the #1 Item on a Homebuyer's Wish List During the Holidays
Your House Could Be the #1 Item on a Homebuyer’s Wish List During the Holidays Each year, homeowners planning to make a move are faced with a decision: sell their house during the holidays or wait. And others who have already listed their homes may think about removing their listings and waiting until the new year to go back on the market. The truth is many buyers want to purchase a home for the holidays, and your house might be just what they’re looking for. Here are five great reasons you shouldn’t wait to sell your house. 1. While the supply of homes for sale has increased this year, there still aren’t enough homes on the market to keep up with buyer demand. As Nadia Evangelou, Senior Economist & Director of Forecasting at the National Association of Realtors (NAR), explains: “There’s still this gap between demand and supply because we were underbuilding for many years. . . . So now we see demand is slowing, but it still outpaces supply.” 2. Serious homebuyers are out looking right now. Millennials are driving homebuying demand today, and many are eager to make a purchase. Mark Fleming, Chief Economist at First American, explains: "While not the frenzy of 2021, the largest living generation, the Millennials, will continue to age into their prime home-buying years, creating a demographic tailwind for the housing market.” 3. The desire to own a home doesn’t stop during the holidays. In fact, homes decorated for the holidays appeal to many buyers. Plus, purchasers who look for homes during the holidays are ready to buy. 4. You can restrict the showings in your house to days and times that are most convenient for you. That can help you minimize disruptions, which is especially important this time of year. 5. Rents have skyrocketed in recent years. And, many buyers are looking to escape rising rents and avoid falling into the rental trap for another year. As an article from Zillow says: “Over the next 12 months, rents are expected to grow more than inflation, the stock market and home values." Your home could be their ticket to leaving renting behind for good. Bottom Line There are still many reasons it makes sense to list your house during the holiday season. Connect with Jennifer Schurter, a Realtor in the Portland, Oregon metro area, today to determine if selling now is your best move.
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