Foreclosure Crisis In 2021?

Foreclosure Crisis In 2021?

Will there be a foreclosure crisis in 2021? There are people that are sitting back and waiting to buy a home because they’re scared that a foreclosure crisis is coming and that that’s going to lead to lower home prices, or they’re waiting to snatch up a foreclosure deal to get a better deal on a house. And what I’m here to tell you is the data just does not support that this is going to happen. Now remember, if you have the crisis of 2008, the housing crisis, in your rear view mirror and you’re thinking this same thing is unfolding right now, it’s actually completely different this time around. Remember, that crisis was caused by the housing industry, by the mortgage industry.

In this crisis, the housing industry is the shining light in this crisis. The housing market has been extremely strong. Mortgage lending has remained liquid except for about a month, maybe six weeks, in the spring when the pandemic first hit when we had some problems in the systems with the mortgage industry. But besides that, the mortgage industry has continued on. Rates are low (get a quick rate quote). Housing is extremely strong.

To get an idea of how strong housing has been, check out the National Association of Realtors Housing Statistics.

And here is the main key as to why I don’t think a foreclosure crisis is coming. It’s because the vast majority of people have lots of equity in their house, or at least some equity. So if someone gets into trouble, instead of allowing the house to foreclose, they can instead sell the house, get that equity, pay off whatever debts that they have to take care of, and they can move on and rent for a while until they recover and then buy another home.

This is different than back in 2006, ’07, and ’08, when a lot of people were highly, highly leveraged. There were 100% financing loans happening everywhere. And when home values plummeted, we saw this crisis happened because so many people were upside down on their homes. That’s when we had the 125% refinance loans come out.

But it’s just a different situation now. There’s only an estimated 3% of mortgaged homes across the country that are upside down on their mortgage, which is a very small number historically. The other thing too is as far as home prices potentially going down, I’ve talked about this in previous videos, and then causing that percentage of people that are underwater to go up, I also think that that’s highly unlikely in most markets because of the fact we just have a supply problem right now. There’s just not enough homes to satisfy the demand.

And as millennials start to age and form households, most millennials are getting into their 30s now having children, starting families. So household formations are increasing, household creations, which leads to even more demand. So these are the reasons why I personally don’t think that a foreclosure crisis in 2021 is coming.

For more on the upcoming markets, check out my post on the Housing and Interest Rate Forecast Through 2022.

If you have any questions about that or want to discuss it for your particular situation, just let me know. Give me a call, text or email at 303-670-0137 or baxterteam@fairwaymc.com. I’m also here to answer your other mortgage related questions.