You Shouldn’t Fear Today’s Foreclosure Headlines - Here is Why

Headlines of the housing market aren't painting a great picture today. “Foreclosures are on the rise,” - many headlines say, and the intensity of the words is so powerful that it makes your head spin. 

As a result, you find yourself confused and unable to take the next step. But what if we tell you that there is more to what meets the eye?

Yes, what headlines say is scary. 

Yes, these are the types of stories that make you think twice about buying a house.

Who would buy a home in a market that news outlets say could crash?

However, much of what you read in the news is sensationalized. And when you deconstruct the real data, you will find that the market is not really heading toward where you believe it is going. 

That is why you need to understand the real scenario of what’s going on so that you can make informed decisions about your future.

Here is a deeper look into the matter. 

Reading the Data Beyond an Initial Gaze

The Year end-2022 foreclosure market report by ATTOM shows that foreclosures have gone up by 115% from 2021. However, on further analysis, you will learn that the rate has decreased by 34% since 2019. 

That 115%, triple-digit increase presents a much eye-catching headline that can take many off-guard. The fear it creates stops people from looking beyond that one-line quote. But the truth tells a different story.

It is true that the number of foreclosures has doubled from last year. However, what is equally important is knowing the reasons behind it and how it fares when compared to the pre-pandemic market. 

Many programs emerged as a result of the pandemic, providing homeowners with relief options to protect them from an inflating economy. One of them is the Forbearance program, which, in fact, lowered the foreclosure incidents in 2020 and 2021. 

And that reduction was drastic.

That led to things returning to normal. The graph translated that return to normal as a drastic increase in foreclosures.

The executive VP of Market Intelligence at ATTOM has this to say about the recent reports. 

“Eighteen months after the end of the government’s foreclosure moratorium, and with less than five percent of the 8.4 million borrowers who entered the CARES Act forbearance program remaining, foreclosure activity remains significantly lower than it was prior to the COVID 19 pandemic. It seems clear that government and mortgage industry efforts during the pandemic, coupled with a strong economy, have helped prevent millions of unnecessary foreclosures.”

Programs helped people in many ways. They allowed them to retain their property and find the right footing in an inflating economy. And secondly, the current increase in house prices is motivating many to sell their homes and enhance their wealth.

And if you still want to be convinced, let us go back ten years. Here, the graph shows that foreclosures this year are far lower than 2010 highs, where 2.9 million family’s faced foreclosure after the market crash. 

So, while the headline states that foreclosures are increasing, look at the bigger picture. 

“There will not be a huge wave of distressed sales as happened following the housing bubble.” - Bill McBride, Founder and Author of Calculated Risk, notes. 

He continues that “distressed sales during the housing bust led to cascading price declines, and that will not happen this time.”

Bottom Line

The bottom line is, don’t get swept away by the headlines, Have a wider perspective to get a better context of the market. Yes, there is an increase in the number of foreclosures, but that does not signal the end of times. Things are returning t normal, and the market is still moving up. So, whenever you come across a sensational headline, sit back and contemplate. You will realize that things are much better than you realize.