A Foreclosure Headline Is Only Part of the Story
Headlines about rising foreclosures can make you pause, especially if you are thinking about buying a house. If more homeowners are facing foreclosure, does that mean the housing market is in trouble? Could home prices crash?
Those are reasonable questions. But a percentage increase alone does not give you enough information to answer them.
The ATTOM report cited in the original version of this article showed foreclosure filings increasing 6% compared with the previous quarter and 22% compared with a year earlier. ATTOM is a property data provider.
Those figures describe the period covered by that report, not a standing description of the market. Their larger lesson is useful beyond any single reporting period: an increase in foreclosure filings needs context before you use it to make a housing decision.
Start With the Level, Not Just the Increase
A headline can accurately report that foreclosures are rising while still leaving out an important part of the picture. What level are they rising from, and how does that compare with the housing crisis?
The original report followed a period when foreclosure activity had fallen to record lows. An increase from that unusually low starting point was not the same as a return to the record-high foreclosure levels associated with the housing crash.
That distinction matters. Reporting only the percentage change can create worry without explaining whether the overall level of activity is comparable to a crisis.
The data discussed in the original article showed foreclosure activity remaining far below the levels seen during the housing crash. Its conclusion was that the increase did not signal a foreclosure crisis or a crash in home prices. That was an interpretation of the evidence presented, not a guarantee about future prices.
Why Foreclosures Had Fallen So Low
Relief Programs Helped Homeowners Stay in Place
During the pandemic, forbearance programs and other relief options helped millions of homeowners stay in their homes. Those options gave people time to get back on their feet during a difficult period.
The federal foreclosure moratorium was introduced early in the pandemic, when millions of Americans lost their jobs. Its purpose was to prevent a wave of homeowners losing their properties.
Those measures also affected the timing of foreclosure activity. Some proceedings that otherwise would have happened during the pandemic were delayed.
Rising Home Values Created Another Option
Home values were rising during that period as well. For many homeowners who might otherwise have faced foreclosure, the equity in their homes gave them another path: selling the property instead.
That is an important part of the original article's explanation. Relief programs were not the only reason foreclosure activity stayed low. Homeowner equity also played a role.
Equity can help a homeowner avoid foreclosure, but it is not a promise that every homeowner will avoid financial trouble. The original analysis identified it as a factor that could continue helping limit foreclosure activity.
Why Filings Increased After Relief Ended
When the government's foreclosure moratorium ended, an increase in filings was expected. Activity that had been delayed could begin moving forward again.
Clare Trapasso, identified in the original article as Executive News Editor at Realtor.com, explained that some of the increase represented catch-up activity. Proceedings that would have taken place during the pandemic had been postponed by the moratorium.
Her point was that an uptick following the end of those protections was not, by itself, a reason to panic.
This helps explain why rising filings did not necessarily mean a sudden flood of new foreclosure problems. Some of the activity reflected delayed proceedings rather than entirely new distress.
Still, delayed filings were not the whole explanation. The original article also acknowledged economic pressures affecting homeowners.
Economic Challenges Still Matter
Rob Barber, identified in the original article as CEO of ATTOM, attributed the increase to several factors. These included rising unemployment rates, foreclosure filings moving through the pipeline after two years of government intervention, and other ongoing economic challenges.
Those were explanations for the reporting period discussed in the source article. They should not be read as a claim that unemployment or foreclosure activity is always moving in the same direction.
Barber also noted that many homeowners still had significant home equity. That equity, he explained, could help keep increased foreclosure activity in check.
The practical takeaway is to avoid either extreme. It is not useful to dismiss every increase as harmless. It is also not useful to treat every increase as proof of another housing crash.
The reasons behind the filings matter alongside the number of filings.
How the Comparison With the Housing Crash Helps
The historical comparison included in the original article looked at properties with foreclosure filings over a period beginning before the housing crash. It showed that foreclosure activity had been lower since the crash, and that the increase being discussed remained far below the crisis peak.
That broader view supported the article's central point: rising foreclosure activity and crisis-level foreclosure activity are not the same thing.
The article also identified another difference from the housing-crash period. Buyers in the market it described were more qualified and less likely to default on their loans.
Together, borrower qualifications, homeowner equity and the resumption of delayed proceedings explained why the reported increase was different from what happened when the housing bubble burst.
What to Ask Before Acting on a Headline
If foreclosure news is making you reconsider a purchase or sale, use it as a reason to ask better questions rather than jump to a conclusion.
- What period does the report cover? Do not mistake an older figure for a description of the market you are evaluating.
- What is the starting point? Look beyond the percentage increase to the level of activity behind it.
- What is driving the change? Separate delayed proceedings from the economic challenges discussed in the report.
- How does it compare with crisis levels? A longer historical view can clarify what the headline leaves out.
- What role does equity play? Remember why the original analysis treated homeowner equity as an important factor.
Put the Numbers in Context Before You Decide
The original article's message was straightforward: the reported rise in foreclosures was expected, remained well below housing-crisis levels and did not support the conclusion that another price crash was on the way.
Your next step is to review the reporting period, the comparison and the explanation behind any foreclosure headline that concerns you. Then consider your buying or selling questions with that context in hand.
If you want help talking through what those questions mean for your mortgage plans, reach out to Ed Parcaut, NMLS 235384, for a practical conversation about your next step.
