Are we in for another foreclosure crisis?
Investors are looking for foreclosures to purchase, but there haven’t been all that many. However, the number of foreclosures is on the rise. Between the second and third quarters of 2021, foreclosures have increased by a shocking 30%. Not only that, but if you compare Q3 of this year to that of 2020, they’ve increased by over 60%. Those numbers are even worse here in Ohio. During the same time frame, the number of foreclosures increased by 96%.
That sounds pretty rough, but it’s not actually as bad as it might seem. Those increases started from a very low number of foreclosures. There haven’t been many for the past 18 months because of the pandemic. Government mandates essentially prevented banks from foreclosing; instead, they entered into forbearance agreements with borrowers where they were more or less allowed to stay in their homes without making any payments.
Those forbearance agreements are ending now, but a lot of the homes going into foreclosure aren’t going to end up on the market. That’s because the government is still incentivizing lenders to do modifications, which would allow borrowers to stay in their homes, start making payments again, and ideally, catch up on those payments.
Another thing to consider is that home prices have been rising. Many people who are in default will find that well-maintained homes are worth quite a bit more than they were 18 months ago. Homeowners are potentially sitting on a mountain of equity, so if they can’t get a modification, they can just sell the home on the open market.
In the end, I don’t think we’re going to have a foreclosure crisis. We’re going to see an increase in foreclosures, but it won’t be anything like we saw back in 2008.
If you have any questions or comments about today’s topic, don’t hesitate to give us a call or send an email. We’d love to hear from you.