Don’t Believe Everything You Read: The Truth Many Headlines Overlook
1. Today, the number of foreclosures is on the rise.
A number of recent headlines have highlighted the rising number of foreclosures in today's real estate market. Those stories take an unduly narrow picture of the subject, focusing on the present volume of foreclosures vs 2020. They point out that there are considerably more foreclosures this year than last.
That appears to be quite a challenge. However, while foreclosures have increased above the 2020 numbers, it's crucial to remember that the forbearance plan prevented practically all foreclosures last year. According to ATTOM, foreclosures were down 70% in September compared to September 2019 (the previous typical year).
Even Rick Sharga, an Executive Vice President of the firm that produced the research mentioned in the previous paragraph, says:
"Foreclosure activity continues to rise, as expected, now that the ban has been lifted for three months. However, it's growing more slowly, and it appears that the majority of the activity is focused on vacant and abandoned properties, as well as loans that were in foreclosure prior to the epidemic."
Homeowners who have been affected by the pandemic are not the ones who are currently being burdened. That's because the forbearance program has shown to be effective. According to Ali Haralson, President of Auction.com, the program has performed admirably:
"Thanks in large part to the swift and decisive foreclosure protections put in place by government policymakers and the mortgage servicing industry, the tsunami of foreclosures many feared in the early days of the pandemic has not materialized."
Moreover, the government continues to ensure that homeowners have every option to remain in their houses. Last week, Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra issued the following statement:
"Mortgage servicer and regulatory failures exacerbated the effects of the economic crisis a decade ago." Regulators have learned their lesson, and we will be closely monitoring services to ensure that they are doing everything possible to assist homeowners while still adhering to the law."
2. The Housing Market Will Be Slowed by Rising Mortgage Rates
The hike in mortgage rates is another topic that has been making headlines recently. Some people are concerned that higher rates will have a detrimental influence on the property market, causing home sales to plummet. The resulting headlines are sounding alarm bells that aren't necessary. To combat those headlines, we must consider what history has to say. There is little evidence that an increase in rates causes sales to cease drastically over the last 20 years, according to research. Neither does home price appreciation come to a halt. Let's start with home sales:
Rates have risen three times in the last three years (shown in red in the graph above), although sales have stayed relatively stable (seen in blue in the graph). True, sales dropped drastically from 2007 to 2010, but at the same time, mortgage rates were lowering. In the following two cases, there was no discernible decrease in sales.
Now, consider housing price appreciation (as seen in the graph below):
We can observe that a hike in rates did not result in a drop in prices. Prices continued to rise outside of the years after the catastrophe, but at a slower rate.
There is a great deal of misinformation floating around. Let's connect if you want the greatest guidance on what's going on in the current housing market.