Don’t Expect a Flood of Foreclosures

Are you concerned that there are many foreclosures on the horizon? With the price of almost everything from groceries to gas currently increasing, there has been speculation that more people won’t be able to afford their mortgage payments. While it’s true that foreclosure filings have gone up a little compared to last year, housing market experts say not to expect a flood of foreclosures.

One such expert is Bill McBride of Calculated Risk. After closely following the data and market environment leading up to the crash in 2008, he had predicted the coming wave of foreclosures. Using this same careful eye and analysis, he holds a more optimistic projection for the current market: “There will not be a foreclosure crisis this time.” 

Let’s take a look together at why another flood is so unlikely.

The Number of Homeowners Significantly Behind on Their Mortgage Payments is Low

During the last housing crash, one of the main reasons there were so many foreclosures was because relaxed lending standards made it easy for people to take out mortgages, even if they didn’t have the means to pay them back. Lenders weren’t very strict when assessing applicant credit scores, income levels, employment status, and debt-to-income ratio.

Today, lending standards have tightened, leading to more qualified buyers who can keep up with their mortgage payments. Data from Freddie Mac and Fannie Mae shows the number of homeowners who are seriously behind on their mortgage payments is declining (see graph below):

Molly Boese, Principal Economist at CoreLogic, explains just how few homeowners are struggling to make their mortgage payments:

“May’s overall mortgage delinquency rate matched the all-time low, and serious delinquencies followed suit. Furthermore, the rate of mortgages that were six months or more past due, a measure that ballooned in 2021, has receded to a level last observed in March 2020.”

For a significant rise in foreclosures to occur, the number of people who can’t make their mortgage payments would need to rise. Currently, so many buyers are making their payments that a wave of foreclosures in the near future is highly unlikely.

Bottom Line

If you’re worried about a potential flood of foreclosures, there is nothing in the current data to confirm this will happen. The housing market is full of qualified buyers making their mortgage payments at a very high rate. Are you curious about what this means for you as you buy or sell your home? The Just Say Home KC real estate experts are ready to help you navigate the Kansas City housing market!