Home foreclosure activity spiked in May, but it’s not a crisis — at least, not yet
Home foreclosure activity spiked in May, but it’s not a crisis — at least, not yet
Foreclosures were a staple of our reporting during and after the late-2000s financial crisis, but since then they’ve held at pretty low levels. Recently, however, it looks like that may be starting to shift.
ATTOM Data Solutions, a cruncher of national real estate facts and figures, reports that foreclosure activity has been rising this year and spiked sharply in May. It was up 7% from April and 14% over a year ago.
Foreclosure activity includes everything from forced property auctions and bank repossessions to mortgage default notices. While the number is rising, Susan Wachter at the Wharton School said it’s not yet alarming.
“This increase that we’ve seen — while it is significant and definitely bears watching — still, we’re at very low rates,” she said.
Especially when you compare foreclosures during the bad ol’ days of the late-2000s housing crisis to today, said Guy Cecala at Inside Mortgage Finance.
“You know, we’re still under 0.5% of loans nationwide,” he said. “And at the peak during the foreclosure crisis it was 2.25%, 2.33% of all loans.”
A couple things have kept the situation steady until now, per Susan Wachter: financial regulation and tighter bank lending standards.
Plus, there was federally mandated mortgage-forbearance during the pandemic: “It worked and kept people in their homes,” Wachter said. “And most of the delinquencies due to the loss of income were cured during the period of forbearance.”
But that’s over. Still, there isn’t usually a big increase in people defaulting on their mortgages until we see a big spike in unemployment, which we haven’t.
Though in certain sectors, plenty of people are losing their jobs in certain sectors, said Vivek Sah at the University of Denver.
“I suspect a lot of these foreclosures are because of the layoffs we’ve seen in the tech sector, construction jobs, layoffs in lending and banking,” he said.
Sah also thinks the recent spike in foreclosure activity may be due to house flippers. They may now be stuck with improved properties they can’t sell at improved prices, he said — so some of them may just be walking away.
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