After a long time without many foreclosure sales in the market, they’re coming back quickly. Is it time for home buyers to be concerned?
Foreclosure occurs when a owner stops paying their mortgage and defaults, then the lender tries to obtain the amount owed on the mortgage by selling it the property.
During the pandemic, the government kept most borrowers alive with various stimulus payments and a moratorium on foreclosures and evictions. Now, the nightmare scenario is that foreclosures will increase dramatically and precipitate a housing crash.
About 31,000 properties in the United States are currently facing foreclosure filings — defaults, pending auctions, or cases where the lender is attempting repossession. Compared to last year, foreclosures are up a whopping 185 percent. Most of the highest foreclosure rates are in the “rust belt” of the country such as Ohio and Illinois. New Jersey and South Carolina were also hotspots.
Source: ATTOM analysis.
On the bright side, foreclosure rates are a drop in the bucket compared to 2009, when they spiked dramatically — 10 times the current foreclosure rate — leading to massive price drops and the appearance of massive inventory of homes for sale.
“Foreclosure starts are still way, way below normal,” said Mark Ferguson, a real estate investor who operates a YouTube channel called InvestForMore.
“Just because foreclosures are rising doesn’t mean the sky is falling and the world is ending,” he said. “Actually, it might mean we are returning to a healthy market instead of the crazy 2020-2021 market that we had.”
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