Here’s the truth behind all the hype surrounding a ‘foreclosure wave.’
Last year, many people thought that we were heading for a market crash. Forbearance periods ended, and some were paranoid that tons of foreclosures and short sales would flood the market and lead to a crash. However, that didn’t end up happening.
So what did happen? There were a few short sales and foreclosures; however, most people had some equity in their house, and most also went back to working and paying their bills. Some put the difference on the back ends of their mortgages, and some paid everything back from their forbearances, meaning that the supposed wave didn’t happen. The housing market didn’t crash, and it won’t in the foreseeable future, either. Here are a few reasons why:
If you look over the data, you’ll see that over 50% of homeowners in this country have 45% to 50% equity in their properties. Between 15% and 20% of people own their homes outright. Another chunk of homeowners have 25% to 30% equity. Even if the market crashes, it will have to go down by between 20% and 50% to affect most homeowners.
Some articles circulated last year that claimed short sale and foreclosure inventory had doubled over the previous two months, which fed into the concern that a wave was coming. The thing to remember is that around 10 years ago, foreclosures and short sales were between 40% and 50% of transactions. What the media was describing last year was a tiny spike in foreclosures and short sales, going from 1% to 2% between Q3 and Q4.
Ultimately, our housing market is safe for a while. If something drastic happens, we may revisit this conversation, but in the meantime, please don’t buy into the hype.
Don’t hesitate to give us a call or send us an email if you have any questions or concerns about what’s going on in the market. We’d love to have a conversation with you.