Right now, the rising cost of just about everything from groceries to gas is leading to speculation that more people won’t be able to afford their mortgage payments. This assumption is creating concern that a lot of foreclosures may soon be on the horizon. While it’s true that foreclosure filings have gone up a bit compared to last year, experts say not to expect a flood of foreclosures in the near future.
Take it from Bill McBride of Calculated Risk. McBride is an expert on the housing market, and after closely following the data and market environment leading up to the crash of 2008, he was able to see the foreclosures coming. With the same careful eye and analysis, he has a different take on what’s ahead in the current market, “There will not be a foreclosure crisis this time.”
There Aren’t Many Homeowners Who Are Seriously Behind on Their Mortgage Payments
One of the main reasons there were so many foreclosures during the housing crash in 2008 was because relaxed lending standards made it easy for people to take out mortgages, even if they couldn't show that they’d be able to pay them back. At that time, lenders weren’t being very strict when assessing applicant credit scores, income levels, employment status, and debt-to-income ratio.
Since the recession, lending standards have tightened, leading to more qualified buyers who can afford to make their mortgage payments. And data from Freddie Mac and Fannie Mae shows the number of homeowners who are seriously behind on their mortgage payments is declining.
Molly Boese, Principal Economist at CoreLogic, explains just how few homeowners are struggling to make their mortgage payments. “May’s overall mortgage delinquency rate matched the all-time low, and serious delinquencies followed suit. Furthermore, the rate of mortgages that were six months or more past due, a measure that ballooned in 2021, has receded to a level last observed in March 2020.”
Before there can be a significant rise in foreclosures, the number of people who can’t make their mortgage payments would need to rise. Since so many buyers are making their payments today, a wave of foreclosures isn’t likely.
