Headlines about rising foreclosures can make you uneasy, especially if you are thinking about buying or selling a home. It is easy to read that filings increased and jump straight to a bigger concern: Are home prices about to crash?
The original analysis behind this article made an important distinction. Foreclosure activity had increased, but it remained far below the levels associated with the housing crash and Great Recession.
Understanding that distinction means looking beyond a percentage change. You need to know where the numbers started, why filings increased and how homeowners’ circumstances compared with those during the crash.
Start With the Context Behind the Increase
The ATTOM report cited in the original analysis showed foreclosure filings increasing 2% from the previous quarter and 8% from a year earlier. ATTOM is a property data provider.
Those figures describe the report’s comparison period, not a standing description of the housing market. They are worth keeping in context rather than treating them as an update that applies whenever you read this article.
The increases were real. But reporting only those percentages could create the impression that a foreclosure crisis, followed by falling home prices, was taking shape.
The broader data in the original analysis supported a different conclusion: The increase did not resemble the wave of foreclosures associated with the housing crash.
A rise in filings and a foreclosure crisis are not the same thing. The starting point matters, and in this case, foreclosure activity had been unusually low.
Why Foreclosures Had Fallen to Record Lows
During the pandemic, forbearance programs and other homeowner relief options helped millions of homeowners remain in their homes. Those programs gave people time to get back on their feet during a difficult period.
Federal, state and local foreclosure moratoriums also paused proceedings. Together, these measures helped push foreclosure activity to record lows.
That unusually low starting point is central to understanding the later increase. Comparing filings with a period when proceedings were being held back does not tell the whole story by itself.
Rising Home Values Also Played a Role
Home values rose during that period, giving many homeowners additional equity. Some owners who might otherwise have faced foreclosure were able to use that equity to sell their homes instead.
The original analysis identified equity as an important factor that could continue helping homeowners avoid foreclosure. It was not just the temporary relief programs that mattered. The financial position of homeowners mattered, too.
That is why the discussion needs to include more than the filing count. Relief options, paused proceedings and homeowner equity all helped explain why foreclosure activity had been so low.
Some of the Increase Was Delayed Activity
When the government’s foreclosure moratorium ended, an increase in filings was expected. Proceedings that had been paused could move forward.
Clare Trapasso, identified in the original article as Executive News Editor at Realtor.com, explained that many of those foreclosures would have occurred during the pandemic if the moratoriums had not delayed them.
Her explanation emphasized that lenders were catching up on proceedings. It was not simply a case of large numbers of homeowners suddenly becoming unable to afford their mortgage payments.
Trapasso also noted that real estate experts did not view that activity as a repeat of the Great Recession.
The original analysis acknowledged another factor as well: Some of the increase reflected economic conditions. Delayed proceedings explained part of the change, not all of it.
The useful question is not only whether filings increased. It is also why they increased. That distinction helps separate a backlog of delayed activity from the kind of widespread distress associated with the housing crash.
How the Comparison With the Housing Crash Differs
The housing crash involved millions of foreclosures flooding the market and depressing home prices. That was the comparison addressed in the Bankrate article cited by the original post.
Bankrate explained that the conditions it was describing were different. Most homeowners had a comfortable equity cushion, and lenders had held back default notices during the height of the pandemic.
Those paused notices helped account for the record-low foreclosure activity. The subsequent uptick, Bankrate explained, was nothing like the foreclosure wave following the crash.
The Longer View Matters
The original article also referenced a graph comparing foreclosure filings during the first half of each year, beginning with the housing crash. That comparison showed foreclosure activity consistently below crash-era levels.
Even as filings climbed during the period discussed, they remained far below the record-high number associated with the crash.
Looking at both comparisons helps clarify the message. Filings could be higher than an unusually quiet period while still being much lower than a crisis period. Those statements are not contradictory.
Borrower Qualifications Were Another Difference
The original analysis also pointed to buyer qualifications. It described buyers in the period being discussed as more qualified and less likely to default on their loans than buyers during the housing crash.
Along with equity and the explanation for delayed filings, that difference supported the article’s conclusion that the increase did not signal another foreclosure crisis.
What Buyers and Sellers Should Take Away
The original article concluded that the expected rise in foreclosures was nowhere near housing-bubble crisis levels and would not lead to a crash in home prices. That was its assessment of the data and conditions it cited, not a guarantee about future prices.
The evergreen lesson is straightforward: Do not let a foreclosure headline do all your thinking for you. Before drawing a conclusion, ask:
- What period does the report cover?
- Is the comparison against unusually low activity or crisis-level activity?
- How much of the increase reflects delayed proceedings?
- What does the analysis say about homeowner equity and borrower qualifications?
Your next step is to read the underlying report before making a housing decision based on its headline. If you want help sorting through what the information means for your homebuying or mortgage plans, reach out to Ed Parcaut and talk through your questions.
