@natale_realtors Will foreclosures become a problem? Short answer: Not likely. If they do, our economy has a much larger problem than anyone could fathom. The reason being is equity. Equity is the balance between what a home is worth and what a homeowner owes on the mortgage. Even if prices correct by over 15%, Black Knight predicts only 3.5% of all mortgages will be underwater. If mortgages are not underwater, it’s hard to see how foreclosures become a problem. If they do, that means the market crashed greater than 30%, and/or unemployment reaches 10-15%. Again those issues would both be cataclysmic to the economy and it’s hard to see the path where that happens. Inventory is staying extremely low as interest rates are keeping most people in place, not moving. If inventory is low, prices will only moderately fall. If they only moderately fall, it’s impossible for foreclosures to become an issue because so many people have so much equity in their home. Here’s an example: If a home was purchased in 2020 for $450,000, it probably peaked around $800,000 in value earlier in 2022. Even if the market drops 30%, it’d drop down to a value of $560,000. The mortgage balance will still be less than the purchase price, so there’s plenty of equity left. If that person lost their job, they’d still have the ability to sell the home at a profit or rent it out to cover the mortgage payment. This is why it’s very hard to see a foreclosure crisis happening like it did in 2008. If you need help navigating the current market in your neighborhood, don’t hesitate to contact us. We’re here to help.
Will foreclosures become a problem?
Short answer: Not likely. If they do, our economy has a much larger problem than anyone could fathom. The reason being is equity. Equity is the balance between what a home is worth and what a homeowner owes on the mortgage. Even if prices correct by over 15%, Black Knight predicts only 3.5% of all mortgages will be underwater. If mortgages are not underwater, it’s hard to see how foreclosures become a problem. If they do, that means the market crashed greater than 30%, and/or unemployment reaches 10-15%. Again those issues would both be cataclysmic to the economy and it’s hard to see the path where that happens.
Inventory is staying extremely low as interest rates are keeping most people in place, not moving. If inventory is low, prices will only moderately fall. If they only moderately fall, it’s impossible for foreclosures to become an issue because so many people have so much equity in their home.
Here’s an example: If a home was purchased in 2020 for $450,000, it probably peaked around $800,000 in value earlier in 2022. Even if the market drops 30%, it’d drop down to a value of $560,000. The mortgage balance will still be less than the purchase price, so there’s plenty of equity left. If that person lost their job, they’d still have the ability to sell the home at a profit or rent it out to cover the mortgage payment. This is why it’s very hard to see a foreclosure crisis happening like it did in 2008.
If you need help navigating the current market in your neighborhood, don’t hesitate to contact us. We’re here to help.