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In recent news, there has been a noticeable uptick in articles highlighting the surge in foreclosures and bankruptcies, leaving many potential homebuyers and sellers feeling apprehensive about the state of the housing market. However, a closer examination of the data reveals that the housing market is not on the verge of a crisis despite the increase in these figures.
Foreclosure Activity on the Rise, but not Cause for Panic.
Recent years have seen a historically low number of foreclosures, mainly due to implementing the forbearance program and other relief options in 2020 and 2021. These initiatives were crucial in helping numerous homeowners weather the challenges of those turbulent times.
Upon the expiration of the moratorium, a predictable surge in foreclosures ensued. However, it’s essential to recognize that the current increase in foreclosure filings does not automatically translate to a distressed housing market. A revealing graph, based on research from property data provider ATTOM, showcases the trend in properties with foreclosure filings since 2005. Comparing this to the aftermath of the 2008 housing crash, it’s evident that the current foreclosure figures remain substantially lower while on the rise.
The data indicates that foreclosure filings are inching back up to pre-pandemic levels, but they are still significantly lower than the crisis levels experienced in 2008. Furthermore, the considerable equity American homeowners hold in their properties is a buffer, allowing them to sell and potentially avoid foreclosure.
Moderate Increase in Bankruptcies, No Cause for Alarm
Similarly, the surge in bankruptcies following the financial challenges faced by various industries and small businesses during the pandemic has been modest. Although there has been a slight increase since last year, bringing the numbers close to 2021 levels, it’s crucial to put these figures into perspective.
Comparing the current bankruptcy statistics to a more typical year, such as 2019, reveals the situation could be more dire than it might seem. During the pandemic, the government’s infusion of trillions of dollars in aid to individuals and businesses played a pivotal role in keeping bankruptcy numbers lower in 2021 and 2022. However, despite the slight rise, the current figures are still far from reaching the levels observed before the pandemic.
Understanding the Bottom Line
The critical takeaway is to interpret the data accurately. While foreclosures and bankruptcies are rising, these leading indicators do not signal an imminent market crash. The housing market has undergone substantial changes since the 2008 crisis, and the current environment, bolstered by homeowners’ significant equity and government support, does not mirror the conditions that led to the previous crash.
For those navigating the real estate market, relying on accurate information and expert guidance is essential. Real estate agents, equipped with a deep understanding of market dynamics, can play a crucial role in dispelling fears and helping individuals make informed decisions in these uncertain times. Instead of succumbing to panic, potential buyers and sellers can confidently approach the market, understanding that the current landscape is more resilient than it might appear at first glance.
