No. It’s Not Deja Vu All Over Again with Foreclosures

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Published Date 1/18/2024

We remember it — those of us who lived through it. In 2008, neighborhoods were filled with empty houses with signs in front of them. Tumbleweeds rolled down suburban streets. And banks and investors were busy taking back and buying up foreclosed homes at an alarming rate.

The idea that the end of the mortgage moratorium that protected homeowners from foreclosures during the pandemic might lead to another disaster is not gaining steam, however. And even though the number of homeowners at risk of foreclosure has surged over the past two years, another wave of foreclosures flooding the market with cheap homes is unlikely, real estate experts say.

Still, more than 357,000 properties received a dreaded foreclosure filing in 2023, according to a recent report from real estate data firm ATTOM —up 10% from the previous year—and 136% from 2021, according to Realtor.com’s Clare Trapasso.

“We see the recent rise in foreclosure activity as a market correction rather than a cause for alarm,” ATTOM CEO Rob Barber said in a statement. “It signals a return to more traditional patterns after years of volatility.”

“While that might sound like quite a few homeowners in danger of losing their properties, it represented just 0.26% of all housing units throughout the country,” says Trapasso. “There were also about 28% fewer folks at risk of foreclosure than there were before the COVID-19 pandemic in 2019.” That includes foreclosure filings, default notices, scheduled auctions, and bank repossessions.

The moratorium was a short-term stop gap gesture made to homeowners implemented in early 2020, when scores of Americans suddenly found themselves out of work and unable to pay their mortgages. The federal moratorium expired in mid-2021, but many states extended restrictions, which is why there were so few foreclosures in that year.

“There were also far fewer homeowners receiving foreclosure filings than there were in the Great Recession,” says Trapasso. “Since that time, the riskiest loans that got many borrowers in trouble have largely been eradicated from the market. Lenders have tightened their criteria so that only the most qualified borrowers receive mortgages. And in a switch from the early 2010s, there are more buyers than there are homes for sale.”

A huge difference now is that homeowners who are struggling to pay their mortgage are often able to sell their homes instead of going into foreclosure, with many even profiting off of those sales.

According to Barber, there were about 88% fewer foreclosure filings last year than there were at the peak in 2010, and lenders also repossessed about 2% fewer homes in 2023 than in 2022.

“While foreclosure activity may fluctuate, it’s unlikely to approach the highs seen in the last decade,” he adds.

New Jersey had the highest foreclosure rate in the nation in 2023. About 0.46% of all housing units in the Garden State had received a foreclosure filing. This was followed by Illinois, Delaware, Maryland, and Ohio, at 0.38%. Cleveland had the highest foreclosure rate of all of the largest metropolitan areas in 2023. About 0.62% of homes in the city were hit with a foreclosure filing.

RealtorMag,TBWS

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