Given the massive unemployment wave sweeping the country this year, many people are terrified that home foreclosure levels will spike up soon as well. However, there’s data to prove that history won’t be repeating itself in 2020.
Take a look at these three graphs and allow me to explain why home foreclosure crisis isn’t going to hit the US anytime soon.
The Great Recession and the ensuing foreclosure crisis that gripped the United States in 2008 was due to homeowners holding too little equity. They owed more to the bank in mortgage payments than what their incomes allowed for, due to which many of them lost their homes in foreclosures.
However, the housing market today is extremely stable. Homeowners have plenty of equity in their homes and mortgage standards are more stringent than ever. As a result, homeowners can protect their investments without being subject to emergency foreclosures.
This graph shows that out of the population that requested forbearance, around 44% of them have opted out or fully paid their remaining mortgage balance off. Only around 80,000 homeowners are facing the risk of having their homes foreclosed.
Nearly 66% of all borrowers who have exited forbearance either started a payment deferral plan, made good on their monthly payments to date, or have repaid the forborne payments. The monthly payments of these mortgage borrowers are back to pre-pandemic levels for the most part.
The 2008 Great Recession saw hundreds of thousands of homes being foreclosed throughout the country. The housing market was suddenly flooded with houses due to homeowners defaulting on their payments. At its peak, more than 500,000 homes were foreclosed in 2009.
However, that’s unlikely to happen again today. Black Knight recently reported that more than 91% of people who chose forbearance possessed 11% equity on average in their houses. Although that might not be impressive at first, having this much equity allows homeowners to avoid foreclosures. They can even sell their houses if needed and pocket a decent amount of gains.
Lack of adequate housing equity and economic distress are the prime triggers leading to a foreclosure. While both triggers are necessary, they don’t always merit a foreclosure. COVID-19 hotspots in the country have the highest percentage of financially distressed households. However, the people living in these places have built up enough equity in their homes to weather challenging financial circumstances.
Now the question on your minds might be this – what about when the forbearance period comes to an end? A lot of lenders are allowing homeowners to create customized deferred payment plans. Homeowners have multiple options before them. By communicating and planning effectively with their lenders, homeowners with sufficient equity can easily avoid foreclosures.
It’s inevitable that given the financial hardships the American population has been through in 2020, some people will wind up having to foreclose their houses.
However, there’s no need for home buyers in San Antonio to be worried about a 2008-like foreclosure crisis happening again in the United States. The data backs this assertion up as well.
Keep yourself informed and updated with the latest insights and data reports from one of the top real estate agents in San Antonio instead of listening to scary doomsday headlines that serve no purpose.
Reach out to me today to find the best homes for sale in San Antonio TX or to sell your home.
Ray Suarez, MBA. Realtor
Miguel Herrera Luxury Lifestyle
Coldwell Banker Global Luxury D’Ann Harper, REALTORS®
ALHS, CHLMS, FHA, HHS, MRP, SFR, AHWD, eNetwork & Green Specialist
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