Las Vegas Real Estate BlogRecently posted or modified blog posts in the category - Foreclosurehttps://www.buyrealestateinvegas.com/blog/Copyright BuyRealEstateInVegas.com2023-08-18T13:08:39-07:00tag:buyrealestateinvegas.com,2012-09-20:29817Don’t Expect a Wave of Foreclosures<a href="https://www.simplifyingthemarket.com/en/content/images/20230816/Dont-Expect-A-Wave-Of-Foreclosures-MEM.png?a=444044-181e2190437273b2a85d79d9a0d8c4bd" rel="noopener noreferrer" target="_blank" style="font-size: 17px;"><img src="https://files.keepingcurrentmatters.com/content/images/20230816/Dont-Expect-A-Wave-Of-Foreclosures-MEM.png" /></a>
Some Highlights
With ongoing high <a href="https://www.mykcm.com/2023/08/03/how-inflation-affects-mortgage-rates/" rel="noopener noreferrer" target="_blank">inflation</a> pushing up everyday costs, some people are worried that'll create a flood of foreclosures. Here's why that's <a href="https://www.freddiemac.com/investors/financials/pdf/0523mvs.pdf" rel="noopener noreferrer" target="_blank">unlikely</a>.
Fewer <a href="https://www.freddiemac.com/investors/financials/pdf/0623mvs.pdf" rel="noopener noreferrer" target="_blank">people</a> are seriously <a href="https://www.fanniemae.com/media/48496/display" rel="noopener noreferrer" target="_blank">behind</a> on mortgage <a href="https://www.corelogic.com/intelligence/loan-performance-insights-july-2023/" rel="noopener noreferrer" target="_blank">payments</a> right now. If foreclosures were going to rise a lot, more people would need to be late on their payments.
Since most are paying on time, a wave isn’t <a href="https://calculatedrisk.substack.com/p/fannie-and-freddie-single-family" rel="noopener noreferrer" target="_blank">coming</a>. If you're concerned about a flood of foreclosures, the <a href="https://www.mykcm.com/2023/07/24/foreclosure-numbers-today-arent-like-2008/" rel="noopener noreferrer" target="_blank">data</a> shows that's not likely.
2023-08-18T12:34:11-07:002023-08-18T13:08:39-07:00Jeff Davenporttag:buyrealestateinvegas.com,2012-09-20:29725Don’t Expect a Flood of Foreclosures<img src="https://files.keepingcurrentmatters.com/content/images/20230814/20230816-dont-expect-a-flood-of-foreclosures.jpg" width="600" style="font-size: 17px;" />
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 <a href="https://www.simplifyingthemarket.com/en/2023/07/24/foreclosure-numbers-today-arent-like-2008/?a=444044-181e2190437273b2a85d79d9a0d8c4bd" rel="noopener noreferrer" target="_blank">foreclosure filings</a> 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 <a href="https://calculatedrisk.substack.com/p/fannie-and-freddie-single-family" rel="noopener noreferrer" target="_blank">take</a> 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.
There Aren’t Many Homeowners Who Are Seriously Behind on Their Mortgage Payments
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 <a href="https://www.freddiemac.com/investors/financials/pdf/0523mvs.pdf" rel="noopener noreferrer" target="_blank">data</a> from <a href="https://www.freddiemac.com/investors/financials/pdf/0623mvs.pdf" rel="noopener noreferrer" target="_blank">Freddie Mac</a> and <a href="https://www.fanniemae.com/media/48496/display" rel="noopener noreferrer" target="_blank">Fannie Mae</a> shows the number of homeowners who are seriously behind on their mortgage payments is declining (see graph below):
<a href="https://www.simplifyingthemarket.com/en/content/images/20230814/20230816-Serious-Delinquencies-on-a-decline.png?a=444044-181e2190437273b2a85d79d9a0d8c4bd" rel="noopener noreferrer" target="_blank"><img src="https://files.keepingcurrentmatters.com/content/images/20230814/20230816-Serious-Delinquencies-on-a-decline.png" /></a>Molly Boese, Principal Economist at CoreLogic, <a href="https://www.corelogic.com/intelligence/loan-performance-insights-july-2023/" rel="noopener noreferrer" target="_blank">explains</a> 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.
Bottom Line
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.2023-08-16T15:38:53-07:002023-08-16T15:47:15-07:00Jeff Davenporttag:buyrealestateinvegas.com,2012-09-20:29313Foreclosure Numbers Today Aren’t Like 2008<img src="https://files.keepingcurrentmatters.com/content/images/20230721/20230724-foreclosure-numbers-today-arent-like-2008.jpg" width="600" style="font-size: 17px;" />
If you've been keeping up with the news lately, you've probably come across headlines talking about the increase in foreclosures in today’s housing market. This may have left you with some uncertainty, especially if you're considering <a href="https://www.simplifyingthemarket.com/en/2023/07/05/two-questions-to-ask-yourself-if-youre-considering-buying-a-home/?a=444044-181e2190437273b2a85d79d9a0d8c4bd" rel="noopener noreferrer" target="_blank">buying a home</a>. It’s important to understand the context of these reports to know the truth about what’s happening today.
According to a <a href="https://www.attomdata.com/news/market-trends/foreclosures/attom-mid-year-2023-u-s-foreclosure-market-report/" rel="noopener noreferrer" target="_blank">recent report</a> from ATTOM, a property data provider, foreclosure filings are up 2% compared to the previous quarter and 8% since one year ago. While media headlines are drawing attention to this increase, reporting on just the number could actually generate worry for fear that prices could crash. The reality is, while increasing, the data shows a foreclosure crisis is not where the market is headed.
Let’s look at the latest information with context so we can see how this compares to previous years.
It Isn’t the Dramatic Increase Headlines Would Have You Believe
In recent years, the number of foreclosures has been down to record lows. That’s because, in 2020 and 2021, the forbearance program and other relief options for homeowners helped millions of homeowners stay in their homes, allowing them to get back on their feet during a very challenging period. And with home values rising at the same time, many homeowners who may have found themselves facing foreclosure under other circumstances were able to leverage their <a href="https://www.simplifyingthemarket.com/en/2023/05/15/homeowners-have-incredible-equity-to-leverage-right-now/?a=444044-181e2190437273b2a85d79d9a0d8c4bd" rel="noopener noreferrer" target="_blank">equity</a> and sell their houses rather than face foreclosure. Moving forward, <a href="https://www.simplifyingthemarket.com/en/2023/06/16/how-owning-a-home-grows-your-wealth-with-time-infographic/?a=444044-181e2190437273b2a85d79d9a0d8c4bd" rel="noopener noreferrer" target="_blank">equity</a> will continue to be a factor that can help keep people from going into foreclosure.
As the government’s moratorium came to an end, there was an expected rise in foreclosures. But just because foreclosures are up doesn’t mean the housing market is in trouble. As Clare Trapasso, Executive News Editor at Realtor.com, <a href="https://www.realtor.com/news/trends/foreclosures-continue-to-surge-with-more-homeowners-now-in-danger-of-losing-their-properties/" rel="noopener noreferrer" target="_blank">says</a>:
“Many of these foreclosures would have occurred during the pandemic, but were put off due to federal, state, and local foreclosure moratoriums designed to keep people in their homes . . . Real estate experts have stressed that this isn’t a repeat of the Great Recession. It’s not that scores of homeowners suddenly can’t afford their mortgage payments. Rather, many lenders are now catching up. The foreclosures would have happened during the pandemic if moratoriums hadn’t halted the proceedings.”
In a recent article, Bankrate also <a href="https://www.bankrate.com/real-estate/is-the-housing-market-about-to-crash/" rel="noopener noreferrer" target="_blank">explains</a>:
“In the years after the housing crash, millions of foreclosures flooded the housing market, depressing prices. That’s not the case now. Most homeowners have a comfortable equity cushion in their homes. Lenders weren’t filing default notices during the height of the pandemic, pushing foreclosures to record lows in 2020. And while there has been a slight uptick in foreclosures since then, it’s nothing like it was.”
Basically, there’s not a sudden flood of foreclosures coming. Instead, some of the increase is due to the delayed activity explained above while more is from economic conditions.
To further paint the picture of just how different the situation is now compared to the housing crash, take a look at the graph below. It uses data on foreclosure filings for the first half of each year since 2008 to show foreclosure activity has been consistently lower since the crash.
<a href="https://www.simplifyingthemarket.com/en/content/images/20230721/20230724-foreclosures-in-the-first-6-months-of-the-year.png?a=444044-181e2190437273b2a85d79d9a0d8c4bd" rel="noopener noreferrer" target="_blank"><img src="https://files.keepingcurrentmatters.com/content/images/20230721/20230724-foreclosures-in-the-first-6-months-of-the-year.png" /></a>
While foreclosures are climbing, it’s clear foreclosure activity now is nothing like it was back then. Today, foreclosures are far below the record-high number that was reported when the housing market crashed.
In addition to all the factors mentioned above, that’s also largely because buyers today are more qualified and less likely to default on their loans.
Bottom Line
Right now, putting the data into context is more important than ever. While the housing market is experiencing an expected rise in foreclosures, it’s nowhere near the crisis levels seen when the housing bubble burst, and that won’t lead to a crash in home prices.2023-07-24T12:52:41-07:002023-07-24T14:22:54-07:00Jeff Davenporttag:buyrealestateinvegas.com,2012-09-20:24199Should I Fear Today’s Foreclosure Headlines?<img width="750" height="410" src="https://files.mykcm.com/2023/01/24115337/why-you-shouldnt-fear-todays-foreclosure-headlines-kcm.jpg" class="attachment-entry size-entry wp-post-image" alt="Why You Shouldn’t Fear Today’s Foreclosure Headlines | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2023/01/24115337/why-you-shouldnt-fear-todays-foreclosure-headlines-kcm.jpg 750w, https://files.mykcm.com/2023/01/24115337/why-you-shouldnt-fear-todays-foreclosure-headlines-kcm-600x328.jpg 600w, https://files.mykcm.com/2023/01/24115337/why-you-shouldnt-fear-todays-foreclosure-headlines-kcm-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" style="font-size: 17px;" />
If you’ve seen recent headlines about foreclosures surging in the housing market, you’re certainly not alone. There’s no doubt, the <a href="https://www.simplifyingthemarket.com/2023/01/10/the-truth-about-negative-home-equity-headlines/?a=444044-181e2190437273b2a85d79d9a0d8c4bd" title="stories" target="_blank" rel="noopener noreferrer">stories</a> in the media can be pretty confusing right now. They may even make you think twice about buying a home for fear that prices could crash. The reality is, the data shows a foreclosure crisis is not where the market is headed, and understanding what that really means is mission critical if you want to know the truth about what’s <a href="https://www.simplifyingthemarket.com/2023/01/11/todays-housing-market-is-nothing-like-15-years-ago/?a=444044-181e2190437273b2a85d79d9a0d8c4bd" title="happening today" target="_blank" rel="noopener noreferrer">happening today</a>. Here’s a deeper look.
According to the <a href="https://www.attomdata.com/news/market-trends/foreclosures/attom-year-end-2022-u-s-foreclosure-market-report/" title="Year-End 2022 U.S. Foreclosure Market Report" target="_blank" rel="noopener noreferrer">Year-End 2022 U.S. Foreclosure Market Report</a> from ATTOM, foreclosure filings are up 115% from 2021, but down 34% from 2019. As media headlines grab onto this 115% increase, it’s more important than ever to put that percentage into context.
While the number of foreclosure filings did more than double last year, we need to remember why that happened and how it compares to more normal, pre-pandemic years in the market. Thanks to the forbearance program and other relief options for homeowners, foreclosure filings were down to record-low levels in 2020 and 2021, so any increase last year is — no surprise — a jump up. Rick Sharga, Executive VP of Market Intelligence at ATTOM, <a href="https://www.attomdata.com/news/market-trends/foreclosures/attom-year-end-2022-u-s-foreclosure-market-report/" title="notes" target="_blank" rel="noopener noreferrer">notes</a>:
“Eighteen months after the end of the government’s foreclosure moratorium, and with less than five percent of the 8.4 million borrowers who entered the CARES Act forbearance program remaining, foreclosure activity remains significantly lower than it was prior to the COVID-19 pandemic. It seems clear that government and mortgage industry efforts during the pandemic, coupled with a strong economy, have helped prevent millions of unnecessary foreclosures.”
Clearly, these options meant millions of homeowners could stay in their homes, allowing them to get back on their feet during a very challenging period. With home values rising at the same time, many homeowners who may have found themselves facing foreclosure under other circumstances were able to leverage their equity and sell their houses rather than face foreclosure, and that trend continues today.
And remember, as the graph below shows, foreclosures today are far below the record-high 2.9 million that were reported in 2010 when the housing market crashed.
<a href="https://files.mykcm.com/2023/01/24115339/us-foreclosure-activity-doubles-annually-but-still-below-pre-pandemic-levels-MEM.png" target="_blank" rel="noopener noreferrer"><img class="aligncenter wp-image-107043" src="https://files.mykcm.com/2023/01/24115339/us-foreclosure-activity-doubles-annually-but-still-below-pre-pandemic-levels-MEM.png" alt="Why You Shouldn’t Fear Today’s Foreclosure Headlines | MyKCM" width="600" height="450" /></a>
So, while foreclosures are rising, keeping perspective in mind is key. As Bill McBride, Founder and Author of Calculated Risk, <a href="https://calculatedrisk.substack.com/p/the-housing-bubble-and-mortgage-debt-76d" title="noted" target="_blank" rel="noopener noreferrer">noted</a> just last week:
“The bottom line is there will be an increase in foreclosures over the next year (from record low levels), but there will not be a huge wave of distressed sales as happened following the housing bubble. The distressed sales during the housing bust led to cascading price declines, and that will not happen this time.”
Bottom Line<br />
Right now, putting the data into context is more important than ever. While the housing market is experiencing an expected rise in foreclosures, it’s nowhere near the crisis levels seen when the housing bubble burst, and that won’t lead to a crash in <a href="https://www.simplifyingthemarket.com/2023/01/20/whats-really-happening-with-home-prices-infographic/?a=444044-181e2190437273b2a85d79d9a0d8c4bd" title="home prices" target="_blank" rel="noopener noreferrer">home prices</a>.
2023-01-25T11:30:19-07:002023-01-25T11:39:29-07:00Jeff Davenporttag:buyrealestateinvegas.com,2012-09-20:23211Are Foreclosures Coming to the Housing Market?<img width="750" height="410" src="https://files.mykcm.com/2022/11/29111238/why-there-wont-be-a-flood-of-foreclosures-coming-to-the-housing-market-KCM.jpg" class="attachment-entry size-entry wp-post-image" alt="Why There Won’t Be a Flood of Foreclosures Coming to the Housing Market | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2022/11/29111238/why-there-wont-be-a-flood-of-foreclosures-coming-to-the-housing-market-KCM.jpg 750w, https://files.mykcm.com/2022/11/29111238/why-there-wont-be-a-flood-of-foreclosures-coming-to-the-housing-market-KCM-600x328.jpg 600w, https://files.mykcm.com/2022/11/29111238/why-there-wont-be-a-flood-of-foreclosures-coming-to-the-housing-market-KCM-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" style="font-size: 17px;" />
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 <a href="https://www.simplifyingthemarket.com/2022/10/26/3-graphs-showing-why-todays-housing-market-isnt-like-2008/?a=444044-181e2190437273b2a85d79d9a0d8c4bd" title="the crash" target="_blank" rel="noopener noreferrer">the crash</a> 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, <a href="https://economics.cmail20.com/t/ViewEmail/d/6DD5AA0E9F6529292540EF23F30FEDED/5323CD85A2087AFD22947492D9797BBC" title="over nine million" target="_blank" rel="noopener noreferrer">over nine million</a> 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), <a href="https://www.mba.org/news-and-research/newsroom/news/2022/11/10/mortgage-delinquencies-decrease-to-new-survey-low-in-the-third-quarter-of-2022" title="says" target="_blank" rel="noopener noreferrer">says</a>:
“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 <a href="https://www.simplifyingthemarket.com/2022/08/08/why-the-forbearance-program-changed-the-housing-market/?a=444044-181e2190437273b2a85d79d9a0d8c4bd" title="forbearance program" target="_blank" rel="noopener noreferrer">forbearance program</a>. 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. <a href="https://www.newyorkfed.org/microeconomics/hhdc" title="Data" target="_blank" rel="noopener noreferrer">Data</a> from the New York Fed shows there are still fewer foreclosures happening today than before the pandemic (see graph below):
<a href="https://files.mykcm.com/2022/11/29111239/foreclosures-up-but-near-record-lows-MEM.png" target="_blank" rel="noopener noreferrer"><img class="aligncenter wp-image-106062" src="https://files.mykcm.com/2022/11/29111239/foreclosures-up-but-near-record-lows-MEM.png" alt="Why There Won’t Be a Flood of Foreclosures Coming to the Housing Market | MyKCM" width="600" height="450" /></a>
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 <a href="https://www.simplifyingthemarket.com/2022/11/14/home-equity-a-source-of-strength-for-homeowners-today/?a=444044-181e2190437273b2a85d79d9a0d8c4bd" title="sell their homes" target="_blank" rel="noopener noreferrer">sell their homes</a> 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 <a href="https://www.simplifyingthemarket.com/2022/11/04/homeownership-wins-over-time-infographic/?a=444044-181e2190437273b2a85d79d9a0d8c4bd" title="more equity" target="_blank" rel="noopener noreferrer">more equity</a> than they realize. As Ksenia Potapov, Economist at First American, <a href="https://blog.firstam.com/economics/will-foreclosures-rise-as-the-housing-and-labor-markets-cool" title="says" target="_blank" rel="noopener noreferrer">says</a>:
“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 <a href="https://www.attomdata.com/news/market-trends/home-sales-prices/attom-q2-2022-u-s-home-equity-and-underwater-report/" title="explains" target="_blank" rel="noopener noreferrer">explains</a> 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, let’s connect.
2022-11-30T11:33:58-07:002022-11-30T12:27:40-07:00Jeff Davenport