Foreclosure up by 132% – How this Affects the Housing market in 2022

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Patrick Iturra, May 18, 2022

Real estate data changes over months. Every year, the data help experts predict upcoming housing market changes. Some primary stats catch more attention each time the new data is collected. 

Recently, Attom data released its Q1 Foreclosure report that shows that the foreclosure rate has increased by 132%. In the following section, I will write about the details and everything you should know! 

Keep reading! 

When the data was collected, three things drove more attention from the investors this were-.

  1. Active foreclosures.
  2. Rising number of foreclosures in 2022.
  3. Mortgage offenses/delinquencies 

Before we dig into more details on each, we need to know how foreclosure filing affects the housing market.

How does foreclosure filing affect the housing market?

Foreclosure filing directly impacts the housing market as it affects the prices of houses. Typically, a foreclosed house is said to have a lower value; we can get an idea about this because the regular prices of properties and foreclosure-related rates are compared in different parts of the United States. A foreclosed house would sell at a relatively lesser price.

Even houses that are close to foreclosure are said to impact their prices. There have been studies on how significant is this impact on costs, and the results state that it is pretty prominent and cannot be overlooked.

A well-informed lender can take better action on a delinquent mortgage. Some studies even state foreclosure is a “path to lower prices” in real estate. For this very reason, buyers and sellers try to gather as much information on foreclosure as possible.

Let’s see what the increasing foreclosure filings have indicated in a recent report and how it impacts the current housing market.

  • Active foreclosures:

This is right at the beginning of foreclosure when the process has not reached liquidation and is in the completion phase. An active foreclosure can have different outcomes based on how it is reacted to. 

 In March 2022, the number of active foreclosures rose to 7000. In the past ten years, it hasn’t been this high. When a mortgage payment is missed, the lender first attempts to follow up with the borrower. If the borrower goes out without making the missed payment for over three months, the lender can choose to file a foreclosure after sending a written letter of warning.

An increased number of active foreclosures in the recent data collected from the housing market indicates an upcoming downfall in the prices of that many houses. But that does not mean the housing market has any demand reduction. The demand in the housing market over the first quarter of 2022 has encouraged more people to invest in real estate.

How does foreclosure filing affect the housing market?

  • Rising number of foreclosures in 2022:

2022 has come with a lot of surprises for the housing market. Some people relate this to the pandemic but say that we need to look at the data from 2021 (which was also pandemic times) and make a comprehensive comparison to know better.

The first quarter of 2022 has been tremendous in foreclosure openings. The number of foreclosures in 2022 has risen to more than 78000 properties in the United States. Experts suggest that this increase in foreclosure filing may seem intimidating to a non-specialist, but the outcomes are not that bad. 

The foreclosure filings are said to slow down in the next half of the year, and the expectations from the housing market are not bad at all. The housing market still has an increasing demand for properties, and this rising demand is one of the reasons ensuring the minor effects of foreclosure on properties.

  • Mortgage Delinquencies:

Mortgage delinquency or a mortgage offense is when the buyer does not make a payment on time and goes against the contract. It is considered an offense since the buyer agrees to the terms and conditions of the agreement and gives his words on making payments timely.

Once the lender sees an occurrence of a mortgage offense, he can file a foreclosure and foreclose the property from the borrower. The property is taken back from the borrower due to this foreclosure.

Delinquent mortgage: Delinquency occurs when the borrower fails to make a mortgage payment. Home loan is a serious business, there are pre-decided terms, and both borrowers and lenders need to be cautious about them.

Not every time a mortgage becomes delinquent, it goes towards foreclosure. Sometimes if the borrower foresees that he won’t be able to make the payment on time, he can request the lender to give him some time to refinance.

How is this increase in foreclosure filing affecting buyers and sellers?

A recent study shows that this spike in foreclosure filings does not mean the housing market is falling. Even though a foreclosed property is said to have a lower market price, it is speculated that sellers will continue to benefit from their existing properties due to increased demand for houses among buyers.

Buyers and sellers are indeed looking into bargains based on foreclosures. Still, it must be kept in mind that there are different types of foreclosure, and it also depends on the lender’s say on the delay in payment by the borrower.

A foreclosed property can go down to default if not evicted on time. Sellers of foreclosed properties tend to ensure that they stay vigilant about taking appropriate actions timely.

Final verdict

Over the past 24+ years, I have worked as a strategic investment advisor. Over time, I have helped many people to generate long-term wealth via investments in real estate.

As an experienced advisor, I will summarize this as follows: 

The increasing number of foreclosed properties is not an indicator of lower housing market values. Foreclosed properties are still listed on multiple listings and can grab the attention of buyers who are looking to work with a bargain.

Property prices are holding up, and if a seller sees his property going close to foreclosure, he can choose to sell it at a better price before it goes down to foreclosure.

A delinquent mortgage is a result of missed payment from the borrower. Sometimes the reason can be as minor as the forgetfulness of the borrower. For such reasons, automatic payments are coming in handy for mortgage payments, ensuring the timely mortgage cost.

That’s my report! If you have any questions regarding real estate agents. I am here to help you and answer all your queries! Then, you can contact me here. 

 

Patrick Iturra, Asset Manager at Estate Investments Group

Business development is the ideas, initiatives, and activities that help improve a business. My experience results in your business’s increased revenue, expansion, and profitability by building strategic partnerships and making strategic business decisions.

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