With forbearance plans about to come to an end, many are concerned the housing market will experience a wave of foreclosures like the housing bubble 15 years ago. Here are four reasons why that won\u2019t happen.<\/p>\n\n\n\n
After the last housing crash, about 9.3 million<\/a> households lost their home to a foreclosure, short sale, or because they simply gave it back to the bank.<\/p>\n\n\n\n As stay-at-home orders were issued early last year, the overwhelming fear was the pandemic would decimate the housing industry in a similar way. Many experts projected 30% of all mortgage holders<\/a> would enter the forbearance program. Only 8.5% actually did, and that number is now down to 3.5%<\/a>.<\/p>\n\n\n\n As of last Friday, the total number of mortgages still in forbearance stood at 1,863,000<\/a>. That\u2019s definitely a large number, but nowhere near 9.3 million.<\/p>\n\n\n\n Of the 1.86 million homeowners currently in forbearance, 87% have at least 10% equity<\/a> in their homes. The 10% equity number is important because it enables homeowners to sell their houses and pay the related expenses instead of facing the hit on their credit that a foreclosure or short sale would create.<\/p>\n\n\n\n The remaining 13% might not all have the option to sell, so if the entire 13% of the 1.86M homes went into foreclosure, that would total 241,800 mortgages. To give that number context, here are the annual foreclosure numbers<\/a> of the three years leading up to the pandemic:<\/p>\n\n\n\n The probable number of foreclosures coming out of the forbearance program is nowhere near the number of foreclosures coming out of the housing crash 15 years ago. The number does, however, draw a similar comparison to the three years prior to the pandemic.<\/p>\n\n\n\n When foreclosures hit the market in 2008, there was an excess supply of homes for sale. The situation is exactly the opposite today. In 2008, there was a 9-month supply of listings for sale. Today, that number stands at less than 3 months of inventory<\/a> on the market.<\/p>\n\n\n\n As Lawrence Yun, Chief Economist at the National Association of Realtors<\/em> (NAR), explains<\/a> when addressing potential foreclosures emerging from the forbearance program:<\/p>\n\n\n\n \u201cAny foreclosure increases will likely be quickly absorbed by the market. It will not lead to any price declines.\u201d<\/em><\/p><\/blockquote>\n\n\n\n2. Most of the 1.86M in forbearance have enough equity to sell their home<\/strong><\/h4>\n\n\n\n
3. The current market can absorb any listings coming to the market<\/strong><\/h4>\n\n\n\n
4. Those in power will do whatever is necessary to prevent a wave of foreclosures<\/strong><\/h4>\n\n\n\n