The expert says the spike in foreclosures indicates that the economic recovery – and especially employment – is not complete.
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Mortgage data and analytics firm Black Knight reported that foreclosures increased sevenfold in January compared to December, with approximately 33,000 loans foreclosed. What’s more, data from real estate analytics company ATTOM Data Solutions showed that in February 2022, lenders seized 2,634 U.S. properties through foreclosure, up 70% from last year (though still 45% from last month). %).
What do these foreclosures say about the housing market?
Realtor.com Senior Economist George Ratiu says the surge in foreclosures in January is an early signal that many of the regulatory protections put in place during the pandemic to help Americans stay in their homes are starting to fade. Indeed, millions of people received mortgage relief during the pandemic, putting their mortgage payments on hold. According to professionals, most of them got back on their feet and ended their patience in 2020 and 2021.
People who maintained abstinence through 2022 are more likely to suffer ongoing financial hardship. “When their patience runs out, they are less likely to be able to renew their payments and more likely to find themselves in a foreclosure situation,” says Holden Lewis, home and mortgage loan expert at NerdWallet. Moreover, for many, the holding period is about to expire and there is a backlog of loans that are either in the process of loss mitigation or past due even after exiting mitigation, which could still be foreclosed in the coming months.” Ratiu says.
The surge in foreclosures “also indicates that the recovery of the economy, and especially employment, is not complete. We lost 20.2 million jobs in April 2020 alone as the government imposed wide-ranging lockdowns and the economy has since brought back 18.8 million jobs, but we are still short of pre-pandemic levels,” says Ratiu.
However, “the best plus for housing markets and homeowners is that the January foreclosure rate remains 40% below the pre-pandemic value,” says Ratiu. In fact, professionals say, the housing market is still thriving, thanks in part to mortgage interest rates that are still at record lows (although they have jumped recently). “Given that the demand for houses far exceeds the supply, no one will receive foreclosure for theft. Competing buyers are driving up prices on all homes, including buyouts,” says Lewis.
Should I buy a ransom?
While no one wants to cash in on someone else’s misfortune, you may encounter confiscated property while looking for a home. Here’s what you need to know about a potential purchase.
First, it’s important to understand the different types of ransoms that are up for sale. Depending on the stage of the delinquent process, you may face a pre-foreclosure where the creditor notifies the homeowner of the default; short sales, when the homeowner tries to sell the house for less than the mortgage value due to financial difficulties; the sheriff’s sale auction, which sells unused real estate in the courthouses; foreclosure on a bank, known as real estate ownership (REO); and state foreclosures, when real estate is purchased with loans from the Federal Housing Finance Agency or the Veterans Administration.
Foreclosed properties can be found in the Multiple Listing Service (MLS), among other things. They “are also listed in newspapers, bank offices and websites. For buyers considering foreclosed properties, auctions are another place to find affordable homes,” says Ratiu.
But in today’s market, where a shortage of homes for sale keeps prices high, buyers may not necessarily find theft when viewing a foreclosed property. “Banks that own REO homes have an incentive to sell them quickly, but they are aware of market prices and are also required to recoup the value of the home. It is important for buyers considering repossession to undergo an inspection to determine the physical condition of the home. Get a repair cost estimate, which should also determine the bid price they might be willing to make,” says Ratiu. Lawrence Yun, Chief Economist for the National Association of Realtors, adds: “Many real estate investors are looking for a good foreclosure deal, but it’s still a seller’s market.”