The rising cost of essentials, such as groceries and gas, has sparked speculation that many individuals won’t be able to afford their mortgage payments. This concern has led to the fear of an imminent wave of foreclosures. While it's true that foreclosure filings have seen a slight increase compared to last year, experts are asserting that a significant foreclosure crisis is unlikely.
Bill McBride of Calculated Risk, an esteemed expert on the housing market, provides insight into this matter. Drawing from his deep analysis of data and market dynamics leading up to the 2008 crash, McBride accurately predicted the foreclosures of that time. However, with the current market conditions and meticulous analysis, he sees a different landscape unfolding:
“There will not be a foreclosure crisis this time.”
Let's delve into why this perspective is supported by the present circumstances.
Few Homeowners Are Significantly Behind on Their Mortgage Payments
During the previous housing crash, relaxed lending standards allowed individuals to secure mortgages even if they couldn't prove their ability to repay. Lenders were lenient in assessing credit scores, income levels, employment status, and debt-to-income ratios.
Today, lending standards have tightened, leading to more qualified buyers who can comfortably meet their mortgage obligations. Data from Freddie Mac and Fannie Mae demonstrates a decline in homeowners who are significantly behind on their mortgage payments (see graph below).
Molly Boese, Principal Economist at CoreLogic, emphasizes the positive trend:
“The overall mortgage delinquency rate matched the all-time low in May, and serious delinquencies followed suit. Furthermore, the rate of mortgages that were six months or more past due, which rose in 2021, has now retreated to levels seen in March 2020.”
For a substantial increase in foreclosures to occur, the number of individuals unable to make mortgage payments would need to rise considerably. Given that, a large number of buyers are consistently fulfilling their payment obligations, a surge in foreclosures is improbable.
In Conclusion
If you're concerned about an impending wave of foreclosures, it's crucial to understand that current data doesn't support such a scenario. Qualified buyers are demonstrating a high rate of mortgage payment fulfillment, reinforcing the stability of the housing market.
If you're seeking expert guidance to navigate the housing landscape or address affordability concerns, don't hesitate to connect with us. We're here to assist you in making informed decisions about your real estate journey.
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