Why You Shouldn’t Fear Today’s Foreclosure Headlines

You’re not the only one who has seen recent headlines about foreclosures rising in the housing market. The media stories are confusing, there’s no doubt. These stories may make you reconsider buying a home, or even cause you to be concerned about the possibility of prices plummeting. The truth is that a foreclosure crisis is not the future of the market. Understanding what this means is crucial if you want the truth about today’s market. Here’s a closer look. According to the Year-End 2022 U.S. Foreclosure Market Report by ATTOM, foreclosure filings have increased 115% since 2021 but are down 34% since 2019. It’s important to understand the context of this 115% increase as media headlines continue to grab on to it.
Although the number of foreclosure filings increased by more than twice last year, it is important to consider why and how it compares with other normal, pre-pandemic years. The forbearance program and other relief options available to homeowners helped to reduce foreclosure filings to a record low in 2020 and 2021. Therefore, any increase last year is not surprising. Rick Sharga, Executive VP Market Intelligence at ATTOM notes:
“Eighteen month after the government’s foreclosure moratorium was lifted, and with less that five percent of the 8.4million borrowers who enrolled in the CARES Act forbearance programme remaining, foreclosure activity is still significantly lower than it was before the COVID-19 pandemic. It is clear that the strong economy and efforts of the government and mortgage industry during the pandemic have prevented millions of unnecessary foreclosures.
These options allowed millions of homeowners to stay in their homes, which allowed them to get back on track after a difficult period. Many homeowners who were facing foreclosure due to other circumstances were able leverage their equity and sell their homes rather than face foreclosure. This trend continues today.
Remember, foreclosures today are much lower than the record-breaking 2.9 million reported in 2010, when the housing market crashed.

While foreclosures are on the rise, it is important to keep a positive perspective. Bill McBride, the founder and author of Calculated Risk, stated this last week:
“The bottom line is that there will be an increase of foreclosures over the next 12 months (from record low levels), but not a large wave of distressed sales like what happened after the housing bubble. Cascading price drops were caused by distressed sales during the housing bubble. This will not happen this time.
Bottom LinePutting the data in context is more important than ever. Although the housing market is seeing an expected increase in foreclosures, it is not at the crisis levels that were experienced when the housing bubble burst. This won’t cause a crash of home prices.
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