Foreclosures in our future?

During much of the pandemic, mortgage lenders have been prohibited from foreclosing loans due to missed payments. The latest extension of the foreclosure moratorium will end on June 30. With memories of the very real foreclosure crisis following the mortgage industry crash in 2007, some have predicted a similar event later this year.

The extreme shortage of homes available for sale across the U.S., together with significant price growth in recent months and years, makes this environment very different from the situation in 14 or 15 years ago. In virtually all U.S metropolitan areas housing inventory is so low that Lawrence Yun, chief economist for the National Association of REALTORS®, recently said, “In nearly every market, 20% more inventory means 20% more home sales.” That is absolutely true in the Austin area. For the rest of Mr. Yun’s thoughts on this, read:

Housing market inventory is starting to recover

We don’t see much evidence to support that headline in Austin — we are not gaining ground on inventory here — but the key point is true: We have a backlog of home buyers and investors ready to sweep up new listings as they appear, and builders are unable to take up much of that slack at this point.

A recent article from RisMedia offers some balanced insight on the subject as well:

Foreclosure and Eviction Moratorium End in Sight, What’s Next?

Two quotes from that article are representative:

“We must not lose sight of the dangers so many consumers still face. Millions of families are at risk of losing their homes to foreclosure in the coming months, even as the country opens back up,” said Dave Uejio, acting director of the Consumer Financial Protection Bureau (CFPB), in an April press release.

“I don’t think it’s going to be a massive wave, certainly not like we saw back in 2005 through 2010 when we were dealing with the Great Recession,” [Dan] Kruse [president and CEO of Century 21 Affiliated] says. “Unlike what we saw in the recession where housing prices started to plummet, we’ve been on a steady run for a good ten years now with median sales price increases certainly over the last two years and over the last 15 months given COVID.”

And I have offered my thoughts too:

Mortgage forebearance ends soon …. What then?

We have very strong — and growing — demand for homes of all kinds in the Austin area, and a large pool of would-be buyers ready to move. For owners behind on their mortgages in this environment, selling their properties to avoid foreclosure should be a ready alternative. Not all will be able to make that work, but we are not heading into another great recession, at least not one led by real estate.