Foreclosure moratoriums are no more. But it’s not 2008, either

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Published Date 10/16/2023

We knew it would be coming, but we also knew it wouldn’t even begin to resemble the 2008 housing bust, when jobs were at a premium and our economy scared the entire world.

According to Realtor.com’s Clare Trapasso, a survey of metros with at least 1 million residents found the number of homeowners hit with foreclosure notices in the third quarter of the year jumped 34% from a year ago to nearly 125,000, according to a recent report from real estate data firm ATTOM. They were up 28% from the previous quarter.

“Across the country, about 1 in every 1,121 properties had a foreclosure filing in the third quarter,” she says. “That’s a return to almost pre-pandemic levels as foreclosure moratoriums put in place in the early days of COVID-19 have expired.”

This includes default notices, scheduled auctions, and bank repossessions. “Foreclosures are on the rise again,” ATTOM CEO Rob Barber said in a statement. “It’s evident that some homeowners are still grappling with the pandemic’s financial aftermath or encountering new challenges.” About 11,000 homes were repossessed in the third quarter, representing a 5% jump from a year ago.

Despite flashbacks to the run-up to the housing bubble that burst around 2008, real estate experts don’t believe another foreclosure crisis is looming. “In the aftermath of the Great Recession, the most dangerous mortgages with payments that ballooned sharply over time have largely been eradicated from the market,” says Trapasso. “These were the loans that got many homeowners in trouble when they could no longer afford their monthly housing bills.”

Couple that with mortgage lenders having tightened their qualification standards to ensure only the strongest borrowers receive loans, along with the fact that there are now more buyers than there are homes for sale, and home prices should remain strong. This all makes the chances of another crash highly unlikely.

“The number of new cases filed by lenders in the third quarter did rise just a small amount from the same period last year,” Barber said. But foreclosures “actually dipped a bit quarterly—signs that the upward pattern may be easing.”

Of course, some parts of the U.S. were hit harder than others during the 2008 bubble, so it stands to reason that those were the same areas where the new higher foreclosure rates are higher as well. New Jersey had the highest rate among the states, with 1 in every 595 properties with a foreclosure filing. It was followed by South Carolina, with 1 in every 730; Delaware, with 1 in every 739; Nevada, with 1 in every 763; and Maryland, with 1 in every 780.

Foreclosures aren’t, however, rising in every part of the country, evidenced by metros like Salt Lake City, where foreclosures dropped 74% year over year in the third quarter. The metro was followed by Chicago, down 35%; Kansas City, MO, down 34%; Columbus, OH, down 22%; and Milwaukee, down 21%.

Realtor, TBWS

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