Here are four reasons why you shouldn’t worry about a foreclosure crisis.

With a lot of forbearance plans ending soon, some people are worried that we might see another wave of foreclosures. Today I’ll explain four reasons why you don’t need to worry about the housing market crashing anytime soon.

1. There are far fewer homeowners in trouble now than there were 15 years ago. In 2008, over 9 million homeowners lost their homes to a foreclosure, short sale, or giving their home back to the bank. When stay-at-home orders went into effect, experts predicted about 30% of homeowners would go into forbearance, but that number turned out to be only 8.5%. Today that number is down to 3.5%. That’s still a large number, but it’s a fraction of what we saw 15 years ago.

The market today is very different from 15 years ago.

2. Most people in forbearance have enough equity in their homes to avoid foreclosure. If the worst happened, these people could sell their homes and pay off their mortgages without having to bring money to the table. About 87% of people in forbearance have at least 10% equity in their homes. In other words, they have plenty of equity to avoid foreclosure.

3. Our market can absorb any number of listings. If you’re worried about a wave of foreclosures bringing down the value of your home, don’t be. Inventory is so low in our current market that an influx in homes for sale could actually be a good thing. For perspective, national supply in 2008 was about 9 months. Now we’re down to 3 months. In Kalamazoo, we’re at 1 month supply! Needless to say, the market today is very different from 15 years ago. 

4. People in power have an interest in avoiding foreclosures. In a recent report from the White House, the government says they will require mortgage companies to move missed payments to the end of their mortgage period. This essentially extends the mortgage period, so people can wait on paying back forbearance costs. Also, the USDA and the VA are announcing plans that could help borrowers reduce their mortgage payments by 25%. 

The bottom line is this: Ivy Zellman, head of a respected analytical firm, has said, “The likelihood of us having a foreclosure crisis again is about zero percent.” That being said, I threw out a lot of numbers and stats today. If you have any questions about what I talked about or anything else related to real estate, do not hesitate to reach out to me. I am always here to help.