Now that the mortgage moratorium is over, will we see mass foreclosures?
A lot of people have asked me recently, “How will the end of the mortgage moratorium affect our market?” It seems like some people are afraid a wave of foreclosures will cause a crash, just like in 2008. Today I want to talk about that and what’s happening in our market.
In case you didn’t know, the government enacted a temporary foreclosure moratorium at the beginning of the pandemic. A lot of folks lost their jobs, and the future of the economy was pretty uncertain. Because of this, it was illegal to foreclose on a home until mid-September of 2021. The thing is, everyone who wasn’t able to pay their mortgage now has to make up what they owe. Will this cause a wave of foreclosures?
One thing we know for certain is that foreclosures will increase; however, this process takes time. The moratorium ended in September, but it will still be a while before we see a foreclosure take place. We also know about 1.6 million people went into forbearance during the pandemic.
Fortunately, 98% or more of those people have at least 10% equity in their homes. During the pandemic, home values skyrocketed, so if someone can’t afford their mortgage payments, they can use their equity to avoid foreclosure. This is the exact opposite of what happened in 2008.
I expect we’ll see an uptick in foreclosures, but I don’t think we’ll see a massive wave that tanks the housing market. This is because people facing foreclosure have options. The values of their homes have grown exponentially over the forbearance period, so most of them have a way out of problem.
If you have questions about today’s topic or anything else related to real estate, please call or email me. I am always willing to help.