Many are concerned the housing market will experience a wave of foreclosures similar to what happened after the housing bubble 15 years ago, due to forbearance plans coming to an end. Here are a few reasons why that won’t happen.
1.There are fewer homeowners in trouble this time
After the last housing crash, about 9.3 million households lost their homes to a foreclosure, short sale, or because they simply gave it back to the bank.
As stay-at-home orders were issued early last year, the fear was the pandemic would impact the housing industry in a similar way. Many projected up to 30% of all mortgage holders would enter the forbearance program. In reality, only 8.5% actually did, and that number is now down to 2.2%.
As of late October, the total number of mortgages still in forbearance stood at 1,221,000. That’s far fewer than the 9.3 million households that lost their homes just over a decade ago.
2. Most of the mortgages in forbearance have enough equity to sell their homes
Due to rapidly rising home prices over the last two years, of the 1.22 million homeowners currently in forbearance, 93% have at least 10% equity in their homes. This 10% equity is important because it enables homeowners to sell their homes and pay the related expenses instead of facing foreclosure.
3. The current market can absorb listings coming to the market
When foreclosures hit the market back in 2008, there was an oversupply of houses for sale. It’s exactly the opposite today. In 2008, there was over a nine-month supply of listings on the market. Today, that number is less than a three-month supply.
(Credit: Keeping Current Matters)