Published by REALTOR.com | January 12, 2024
The number of homeowners at risk of foreclosure has surged over the past two years.
More than 357,000 properties received a dreaded foreclosure filing in 2023, according to a recent report from real estate data firm ATTOM. That was up 10% from the previous year—and 136% from 2021.
However, another wave of foreclosures flooding the market with cheap homes is unlikely, real estate experts say.
“We see the recent rise in foreclosure activity as a market correction rather than a cause for alarm,” ATTOM CEO Rob Barber said in a statement. “It signals a return to more traditional patterns after years of volatility.”
While that might sound like quite a few homeowners in danger of losing their properties, it represented just 0.26% of all housing units throughout the country. There were also about 28% fewer folks at risk of foreclosure than there were before the COVID-19 pandemic in 2019.
(Foreclosure filings include default notices, scheduled auctions, and bank repossessions.)
Is the housing market at risk of another crash?
Before anyone panics, the spike in foreclosure filings over the Past two years was partly because of foreclosure moratoriums put in place during the pandemic. It was implemented in early 2020, when scores of Americans suddenly found themselves out of work and unable to pay their mortgages.
The federal moratorium expired in mid-2021. Many states extended restrictions, which is why there were so few foreclosures in that year.
There were also far fewer homeowners receiving foreclosure filings than there were in the Great Recession. Since that time, the riskiest loans that got many borrowers in trouble have largely been eradicated from the market. Lenders have tightened their criteria so that only the most qualified borrowers receive mortgages. And in a switch from the early 2010s, there are more buyers than there are homes for sale.
Homeowners who are struggling to pay their mortgage are often able to sell their homes instead of going into foreclosure. Many are even profiting off of those sales.
There were about 88% fewer foreclosure filings last year than there were at the peak in 2010. Lenders also repossessed about 2% fewer homes, at just over 42,000, in 2023 than in 2022.