There are a lot of questions right now regarding the real
estate market as we head into 2022. The forbearance program is coming to an end
and mortgage rates are beginning to rise.
With all of this uncertainty, anyone with a megaphone – from
the mainstream media to a lone blogger – has realized that bad news sells.
Unfortunately, we’ll continue to see a rash of troublesome headlines over the
next few months. To make sure you aren’t paralyzed by a headline, turn to
reliable resources for a look at what to expect from the housing market next
There are already alarmist headlines starting to appear.
Here are two recent topics you may have seen in the news.
1. Foreclosures Are Spiking Today
There are a number of headlines circulating that call out
the rising foreclosures in today’s real estate market. Those stories focus on
an overly narrow view on that topic: the current volume of foreclosures
compared to 2020. They emphasize that we’re seeing far more foreclosures this
year compared to last.
That seems rather daunting. However, though it’s true
foreclosures have been up over the 2020 numbers, it’s important to realize that
there were virtually no foreclosures last year because of the forbearance plan.
If we compare this September to September of 2019 (the last normal year),
foreclosures were down 70% according to ATTOM.
Even Rick Sharga, an Executive Vice President of the firm
that issued the report referenced in the above article, says:
“As expected, now that the moratorium has been over for
three months, foreclosure activity continues to increase. But it’s increasing
at a slower rate, and it appears that most of the activity is primarily on
vacant and abandoned properties, or loans in foreclosure prior to the
Homeowners who have been impacted by the pandemic are not
generally the ones being burdened right now. That’s because the forbearance
program has worked. Ali Haralson, President of Auction.com, explains that the
program has done a remarkable job:
“The tsunami of foreclosures many feared in the early
days of the pandemic has not materialized thanks in large part to the swift and
decisive foreclosure protections put in place by government policymakers and
the mortgage servicing industry.”
And the government is still making sure homeowners have
every opportunity to stay in their homes. Rohit Chopra, the Director of the
Consumer Financial Protection Bureau (CFPB), issued this statement just last
“Failures by mortgage servicers and regulators worsened
the impact of the economic crisis a decade ago. Regulators have learned their
lesson, and we will be scrutinizing servicers to ensure they are doing all they
can to help homeowners and follow the law.”
2. Rising Mortgage Rates Will Slow the Housing Market
Another topic that’s generating frequent headlines is the
rise in mortgage rates. Some people are expressing concern that rising rates
will negatively impact the housing market by causing home sales to dramatically
decline. The resulting headlines are raising unneeded alarm bells. To
counteract those headlines, we need to take a look at what history tells us.
Looking at data over the last 20 years, there’s no evidence that an increase in
rates dramatically forces sales to come to a halt. Nor does home price
appreciation come to a screeching stop. Let’s look at home sales first:
The last three times rates increased (shown in the graph
above in red), sales (depicted in blue in the graph) remained rather
consistent. It’s true that sales fell rather dramatically from 2007 through
2010, but mortgage rates were also falling at the time. The next two instances
showed no meaningful drop in sales.
Now, let’s take a look at home price appreciation (see graph
Again, we see that a rise in rates didn’t cause prices to
depreciate. Outside of the years following the crash, prices continued to
appreciate, just at a slower rate.
There’s a lot of misinformation out there. If you want the
best advice on what’s happening in the current housing market, let’s connect.
Source: Real Estate with Keeping Current Matters