With the rising cost of just about everything these days, it’s easy to worry about how inflation might affect the housing market. Many fear that high prices and shrinking budgets could push more homeowners into financial trouble, leading to a spike in foreclosures.
But before you worry about a repeat of past housing crashes, let’s take a closer look at the facts. Fortunately, recent data shows that there’s no major foreclosure surge looming.
Why Today’s Market Stands Apart from 2008
To ease any concerns, let’s zoom out and get a view of the broader landscape. Research from ATTOM, a trusted property data provider, shows that the current number of foreclosures is a far cry from what we saw following the 2008 housing crisis. While there was a steep rise in foreclosures then, today’s numbers are significantly lower—and even showed a decline in the most recent report. This stark difference underscores how today’s housing market dynamics are much healthier than those of the past.
If you’ve noticed a slight uptick in foreclosure filings since 2020 and 2021, here’s why: during those years, a nationwide moratorium (highlighted in white) helped millions of homeowners avoid foreclosure during challenging times. This protective measure kept foreclosure rates unusually low. But if we look back further, it’s clear that overall foreclosure activity is still down significantly.
Now, you might wonder: with the cost of living so high, why aren’t foreclosure rates surging today? One major reason is that today’s homeowners have far more equity in their homes than those in 2008. As explained in a recent Bankrate article:
“In the years after the housing crash, millions of foreclosures flooded the housing market, depressing prices. That’s not the case now. Most homeowners have a comfortable equity cushion in their homes.”
This equity serves as a financial buffer, helping homeowners stay afloat even if they face financial strain. For those who struggle to keep up with mortgage payments, the increased equity often provides a way out: selling their home instead of facing foreclosure. This is a drastic shift from 2008, when many people owed more on their mortgages than their homes were worth.
What Lies Ahead for the Housing Market
The rise in everyday expenses is certainly challenging for many. However, this doesn’t spell a foreclosure crisis. The equity cushion that homeowners hold today is key to keeping foreclosure filings low. In short, they have more resources to weather financial difficulties than during past downturns.
Bottom Line
While the costs of essentials like gas and food may be rising, this doesn’t mean the housing market is facing another foreclosure wave. Today’s data shows a resilient market, with homeowners generally in a much stronger position than they were in 2008, largely thanks to substantial equity.
