With Rising Home Prices, is a Foreclosure Crisis Coming?

Dated: December 14 2021

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Back around 2005-2006 the US housing market saw a "bubble" which lead to the foreclosure crisis of 2007-2009. With home prices rising quickly in 2020 and 2021, many homeowners (and prospective buyers) are asking if there's another crash coming and if they should wait out the market until things "normalize."

As we look at the market dynamics today, there are a few things that stand out in suggesting that there's no "bubble" about to burst:

  • The number of mortgages in some stage of the foreclosure process (called the Foreclosure Inventory Rate) was at 0.2% in September 2021. That's down from 0.3% in September 2020, and it is the lowest rate since 1999.
  • Fewer delinquent mortgages. In September 2021, just 1.1% of mortgages were in "early stage delinquency" (30-59 days past due); 0.3% were 60-89 days past due; and 2.4% were 90+ days past due. These numbers were down from 1.5%, 0.7%, and 4.2%, respectively, in September 2021.
  • Increased equity. While some homeowners may be behind on mortgage payments due to job loss or Covid-related mortgage "forebearance" programs, the recent increases in home prices have lead to increased equity for owners. This means that many (if not most) homeowners who are facing serious economic hardship would be able to sell their homes, pay off debt, and possibly pocket some equity without facing foreclosure.

“Record home equity levels have been a boon to many homeowners navigating the cross currents of the pandemic,” said Frank Martell, president and CEO of CoreLogic, in a statement. “Not only have homeowners used this equity to fuel a record level of home improvements and renovation, it has proven to be a vital factor in helping families ward off foreclosure, pay down existing debt and weather changing market conditions.”

Source: RISMedia, Dec 14, 2021

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Diana and Michael Kearns

We are The Kearns Team, and we bring a new perspective and over 30 years of real estate experience to the Denver and Colorado Front Range real estate markets. In today’s real estate environment, yo....

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