With forbearance programs ending, is a tidal wave of foreclosures about to flood the real estate market? In this video, we will look at past and current foreclosure levels and consider whether or not a tidal wave of foreclosures is likely to come.
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Eric Andersen, B.A., M.Div.
Owner/Designated Managing Broker, Eric Andersen Homes
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⭐️ 20 under 40, class of 2021 (Mainstreet Organization of REALTORS®)
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Transcript:
If you’ve been interested in foreclosures over the past few years, the options have been very slim. I’m Eric with Eric Andersen Homes, and in this video, we’re going to look at whether or not a tidal wave of foreclosures is about to flood the real estate market. The first thing we’ll do is take a look at the current foreclosure inventory in the western suburbs of Chicago. As you can see in this chart, foreclosure inventory is virtually non-existent. In July, Downers Grove led the pack with two foreclosures. There was one in Burr Ridge, and zero in Hinsdale and Oak Brook. You can see there has been a steep decline in foreclosures over the past ten years. The peak of foreclosure activity in these areas came in the summer of 2011, when Downers Grove had fifty-eight foreclosures. Since then, it’s been a pretty steady decline, and foreclosure inventory in Hinsdale, Burr Ridge, and Oak Brook has been pretty limited all along. The peak foreclosure count for Burr Ridge in the summer of 2011 was twelve, and Hinsdale and Oak Brook each had nine. Short of something apocalyptic, there is no reason to think a wave of foreclosures is coming. Nationally, you can see that there has been a slight uptick in foreclosures, but there’s not nearly enough to make up for the housing shortage, and as we’ve seen, the western suburbs of Chicago don’t reflect the national trends. Demand has been fueled by the coming-of-age of the Millennials.There are 5 million more buyers in the market today than there were in 2008, when the Gen Xers were hitting their prime earning and home buying age. Overall, there are twelve million more households than there were in 2007, so there are too many buyers competing for too few homes. One big reason for the lack of foreclosures during the pandemic despite job loss and economic strain is the forbearance program. I’ve heard a lot of talk a wave of foreclosures would hit as soon as those programs ended, but the data shows that isn’t the case. You can see in this chart that four out of five homeowners who participated in the forbearance program are either paid in full or have worked out a plan to get caught up. In some cases, that meant a loan modification, a payment deferral, or a combination of the two.The stricter lending standards that were implemented in the wake of the housing crash of 2008 has meant fewer foreclosures, as those who have purchased homes since then have been in a much better position to pay for them. In short, today’s homeowners are in a much better position to pay their mortgages than back in 2008. What’s more, equity is at record levels, so even in situations where there’s a loss of income, more homeowners are in a position to sell their home and avoid foreclosure completely. We’ve not only had an undersupply of foreclosures. The entire housing market has been short of inventory for several years, and this has also helped keep values and equity high. As the chief economist with Moody’s Analytics put it, “There’s some excess savings out there, over 2 trillion worth. . . . There are people that have ownership of those homes right now, that even in a downturn, they’d still likely be able to pay that mortgage and won’t have to hand over keys. And there won’t be a lot of those distressed sales that happened in the 2008 crisis.” If you found this video helpful, be sure to like it and subscribe to my channel, and reach out to me anytime if you’d like help with selling or buying a home in Burr Ridge or the western suburbs of Chicago. I’m Eric with Eric Andersen Homes here to remove the headache from real estate and provide expert guidance for your next purchase or sale.