Are We About to See a Wave of Foreclosures?
Since the beginning of COVID, we’ve all worried about how shutdowns, government aid, and changes in the job market will impact the economy. Over the last year and a half, we’ve faced uncertainty. Yet, the housing market has shined. Home prices and demand have soared.
Both elevated demand and increased home prices link to reduced interest rates and reductions in supply. One reason for the low supply is government restrictions on foreclosures and mortgage protections for buyers. These programs have ended or will end soon. Many people now wonder if fewer protections will lead to an influx of foreclosures.
Will the Number of Home Foreclosures Increase?
The answer isn’t a simple yes or no. While the moratorium on foreclosures ended, lenders can’t immediately act to foreclose. The government extended programs for forbearance to give homeowners more time to arrange alternatives.
Also, even when lenders choose to begin the foreclosure process, it takes several months to complete. During that time, homeowners can work to find payment options and stop foreclosure. For 2021, foreclosures may increase slightly, but a wave shouldn’t occur.
However, 2022 may look different. Homeowners will have to deal with the end of forbearance periods and start paying their mortgages again. If they are unable to do so, they may face foreclosure.
Plus, lenders that begin the foreclosure process soon will see it completed in early 2022. Foreclosures will likely increase next year. But, this wave of foreclosures won’t look like the 2008 housing market. For starters, fewer people are delinquent now. Also, even if foreclosures hit the market, we’ll still have a housing supply gap. The impact on the overall economy should not feel as great.
Tips to Prevent Foreclosure
The homeowners who are currently delinquent have options to try and avoid foreclosure.
1. Contact the mortgage lender
One mistake people make is avoiding talking to the lender when they become delinquent. Yet, reaching out can show goodwill. The lender may want to work with the borrower on a solution instead of proceeding with a foreclosure.
2. Work on a payment plan
Many lenders will work with borrowers to create a payment plan to help the borrower catch up. If you can afford to stay in your home and your lender will allow you to make extra payments at the end of the loan, it might be the best option. With the current housing shortages, finding new housing could be a challenge.
3. Sell the home
It is a seller’s market, and housing prices across the country have increased. Selling a home means the lender gets paid, and the seller keeps the equity from the house. The homeowner prevents a foreclosure on their credit report and likely walks away in a better financial condition.
Understanding the Shifting Housing Market
We know it’s tricky to stay up-to-date on the housing market. Depending on COVID and the desires of the government, restrictions could change again. The bottom line is that the housing market should remain strong due to low supply and high demand regardless of foreclosures.
If you’re selling or buying a home in Southeast Florida, Kenco Home Inspections offers reliable and trusted home inspections. Contact us today to schedule a full home inspection.