Many industry leaders have speculated if the foreclosure forbearance put into place since the start of the pandemic will lead to a foreclosure crisis in 2021. The thought is that many homeowners that have lost work over the past year simply cannot recover, or cannot find new employment, in time. Currently, foreclosure moratoriums have been extended, once again, until June 30, 2021.
An article from the Huffington Post quotes Owen Dashner, owner of Red Ladder Property Solutions, for one professional opinion. Owen states, “Eviction and foreclosure moratoriums will cease in many markets. And we [will] start to see thousands of businesses go under. This is when the real estate market is going to really start to wobble and fall.” – an opinion shared by many other industry professionals.
This opinion does hold some weight. We’ve seen a lot of job loss over the past year, and some foreclosures will be inevitable. But is a tsunami of foreclosures the most likely scenario though? Some say it’s unlikely, and here’s why…
The unemployment rate could be a lot worse
While the unemployment rate has changed very little in the past couple of months, it has dropped significantly since the start of the pandemic in 2020. Data from the Bureau of Labor Statistics shows a drop of about 9 percentage points in the seasonally adjusted unemployment rate over the past year. While 6.1 percent is still high, it does indicate that many people have been able to return to work.
Fewer homeowners are delinquent on mortgage payments
This study from the Mortgage Bankers Association showed a decline in the number of homeowners who are delinquent on their mortgage payments. As of March 2021, 4.9 percent of owners missed a mortgage payment, down from 5 percent since December 2020. The decline is small, but it’s a step in the right direction. The report also remarks that homeowners were the least likely among the groups included (renters, homeowners, and student loan borrowers) to miss a payment over the last four quarters. Also, a total of 6.8 percent of homeowners missed more than two payments.
For comparison, delinquency rates for one to four-unit homes in the fourth quarter hit a low of 3.8 percent, according to the Mortgage Bankers Association. The number of people remaining in forbearance is dropping as well, according to a different MBA study.
However, the data shows not everything is perfect
This all looks great for homeowners, right? But there is still one alarming statistic from the MBA. According to the association, 14.4 percent of borrowers that were not able to make all monthly payments, exited forbearance without a plan in place.
Fortunately, this seller’s market and the rising home prices have increased the amount of equity new homeowners have, which would help them avoid foreclosure. Home inventory is also likely to remain low, and prices high, so if a homeowner found themselves facing foreclosure in the near future, they could find that selling their property would be relatively easy.
For those facing the potential of foreclosure, many real estate, mortgage, and legal professionals will find their services sorely needed. To stay up-to-date on the latest pre-foreclosure data, and know who will soon be seeking a real estate professional, you’ll want to check out The Warren Group’s Pre-Foreclosure data and all it has to offer. Then, reach out to a data specialist at firstname.lastname@example.org to discuss a licensing plan customized to your needs.