The Tsunami of Foreclosures That Never Came
ATTOM is one of the premiere data gathering real estate online marketplaces that covers industry-specific information including valuations, borrower and seller details, sales trends, and tax values. But their foreclosure and distressed property data is probably the most comprehensive in the country.
The firm’s October 2021 (the latest available) foreclosure report has some interesting and counterintuitive facts and trends – one of which is a pleasant surprise which has raised many eyebrows in the industry.
Since the pandemic began and people were often not able to work, there was serious concern that a wave of foreclosures would occur in the near and medium term, causing untold pain and suffering for millions of Americans unable to meet their mortgage payments.
While the study does indeed show an increase in foreclosures since the start of the pandemic, the numbers are nowhere near what was widely predicted by most analysts. The report states: “Despite the increased level of foreclosures, we’re still far below historically normal numbers.” Then the report really shocks: “September foreclosure actions were almost 70 percent lower than they were prior to the Covid-19 pandemic in September 2019, and third quarter (Q3) foreclosure activity in 2021 was 60 percent lower than the same quarter in 2019.” And here’s another kicker from the report: “Even with similar increases in foreclosures over the next few months, we’ll end the year significantly below (emphasis mine) what we’d see in a normal housing market.”
The reasons for this good news include the fact that while many people were unable to work, they nonetheless were spending far less due to closures of restaurant, bars, etc., In general, there was a strong tendency on the part of the population to limit their social activities. Secondly, the economy, prior to the pandemic was very strong and unemployment was very low – more people were able to save money which came in very handy when the unexpected Covid wave arrived in early 2020.
Additionally, the government and the mortgage industry worked together to prevent foreclosures using the foreclosure moratorium and mortgage forbearance program, giving homeowners some breathing space until they were able to get back to work.
States which had the highest foreclosure rates in Q3 of 2021 were Nevada, Illinois, Delaware, and New Jersey. Among the 220 metropolitan statistical areas, those with the highest foreclosure rates were Atlantic City, New Jersey; Peoria, Illinois; Bakersfield, California; Cleveland, Ohio; and Las Vegas, Nevada.
Nationwide, in September 2021, just one in every 7,008 (or 0.11%) properties had a foreclosure filing – a remarkably low number considering what the economy has suffered through during the pandemic. ATTOM reports that this is the lowest number of foreclosures since it began tracking this metric in 2005. In 2021 the stat was 0.16, and in 2010 it was 2.23%.
Other takeaways from the report are that the percentage of U.S. properties in foreclosure in 2021 dropped 29% compared to 2020 and an amazing 95% from a peak of nearly 2.9 million in 2010.
The widely predicted foreclosure tsunami simply did not happen.
The report adds that ATTOM anticipates that repossessions will continue to be lower than normal throughout 2022. The study notes that homeowners have a record amount of equity – over 23 trillion.
Perhaps the most crucial reason for the scarcity of foreclosures is that since home values have been skyrocketing across most of the country, there’s no reason for most folks to enter foreclosure since the they could sell their home (probably at a handsome profit), pay off the mortgage, and pocket the rest.
The roaring real estate market has saved untold numbers of Americans from foreclosure.