Will foreclosures rise in Massachusetts?
Are U.S foreclosures rising?
In August alone, lenders in the United States began the foreclosure process on 23,952 properties. Numbers that high haven’t been seen since before the COVID-19 pandemic.
A total of 117,383 U.S. properties started the foreclosure process in the first six months of 2022, up 219 percent from the first half of last year and up 19 percent from the first half of 2020
Which states have the highest foreclosures?
The states with the greatest increases in foreclosure starts include Oklahoma, Tennessee, Virginia, Arkansas, and Washington, although the highest amount of foreclosure starts occurred in Cook County, IL with 798. Illinois also saw the highest foreclosure rate in 2022, with one out of every 4,072 houses filing for foreclosure.
What are the stats on completed foreclosures?
In addition to an increase in foreclosure starts and filings, completed foreclosures (REOs) are also up 59% compared to August 2021. Illinois topped the list of REOs in the first quarter of 2022, with 493 completed foreclosures by April of 2022.
Do any of these foreclosures have equity in their homes?
Over 90% of borrowers in foreclosure have positive equity in their homes and would benefit from selling these properties at a profit rather than risk losing everything to a foreclosure auction or lender repossession.
While the expiration of the federal moratorium on foreclosure filings continues to impact homeowners struggling with the economic effects of the pandemic, the pace of filings has slowed from the initial shock that followed the end of the moratorium on July 31.
Nationally, auctions, or bank repossessions, rose 5% in October
According to real estate data provider ATTOM Data Solutions, foreclosure filings, which include default notices, scheduled auctions, or bank repossessions, rose 5% in October on a monthly basis and 76% from October 2020, to 20,587 filings.
“As expected, now that the moratorium has been over for three months, foreclosure activity continues to increase,” said Rick Sharga, executive vice president at RealtyTrac, an ATTOM company. “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 that were in foreclosure prior to the pandemic.”
Among the 220 U.S. metropolitan statistical areas tracked by ATTOM, Miami and Chicago had some of the highest foreclosure rates, alongside Trenton, N.J., St. Louis, and Cleveland. At the state level, Illinois, Florida, New Jersey, Nevada, and Ohio had the highest foreclosure rates.
The start of the foreclosure process picked up speed in October nationwide, with a 5% month-over-month increase and a 115% surge from October 2020. New York, Miami, Los Angeles, Houston, and Atlanta led the way among major metro areas by foreclosure starts.
“Most foreclosure activity for the next few months is likely to be foreclosure starts since virtually nothing entered the foreclosure process during the past year,” Sharga said in the release. “The ratio of foreclosure starts to foreclosure completions will normalize over time as we get back to normal levels of activity.”
Foreclosure completions rose 13% month over month and 17% year over year, ATTOM said. Major urban areas with the highest foreclosure completions were St. Louis, Chicago, Baltimore, Philadelphia, and New York.
The big question will downtown Boston condos be next?
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With forbearance plans coming to an end, many are concerned the Boston condo for sale market will experience a wave of foreclosures similar to what happened after the housing bubble 15 years ago. Here are a few reasons why that won’t happen.
After the last housing crash, about 9.3 million households lost their homes to a foreclosure, short sale, or because they simply gave it back to the bank.
As stay-at-home orders were issued early last year, the fear was the pandemic would impact the housing industry in a similar way. Many projected up to 30% of all mortgage holders would enter the forbearance program. In reality, only 8.5% actually did, and that number is now down to 2.2%.
As of last Friday, the total number of mortgages still in forbearance stood at 1,221,000. That’s far fewer than the 9.3 million households that lost their homes just over a decade ago.
Due to rapidly rising home prices over the last two years, of the 1.22 million homeowners currently in forbearance, 93% have at least 10% equity in their homes. This 10% equity is important because it enables homeowners to sell their homes and pay the related expenses instead of facing the hit on their credit that a foreclosure or short sale would create.
The remaining 7% might not have the option to sell, but if the entire 7% of those 1.22 million homes went into foreclosure, that would total about 85,400 mortgages. To give that number context, here are the annual foreclosure numbers for the three years leading up to the pandemic:
- 2017: 314,220
- 2018: 279,040
- 2019: 277,520
The probable number of foreclosures coming out of the forbearance program is nowhere near the number of foreclosures that impacted the housing crash 15 years ago. It’s actually less than one-third of any of the three years prior to the pandemic.
When foreclosures hit the market back in 2008, there was an oversupply of houses for sale. It’s exactly the opposite today. In 2008, there was over a nine-month supply of listings on the market. Today, that number is less than a three-month supply. Here’s a graph showing the difference between the two markets.
The data indicates why Ivy Zelman, founder of the major housing market analytical firm Zelman and Associates, was on point when she stated:
“The likelihood of us having a foreclosure crisis again is about zero percent.”
Will foreclosures rise in Massachusetts?
Regardless where the inventory goes (likely to retreat), the potential home buyers should stay interested, just because of rates staying low. Many of them may be looking forward to when the foreclosures start pouring in.
What’s the latest on the delinquencies/forbearances? From Black Knight:
Total U.S. loan delinquency rate (loans 30 or more days past due, but not in foreclosure): 4.37%
– Month-over-month change: -7.62%
– Year-over-year change: -42.39%
Total U.S. foreclosure pre-sale inventory rate: 0.27%
– Month-over-month change: -1.73%
– Year-over-year change: -24.23%
Total U.S. foreclosure starts: 4,400
– Month-over-month change: 15.79%
– Year-over-year change: -25.42%
Top 5 states by 90-plus days delinquent percentage:
The national delinquency rate is at its lowest level since the pandemic hit, even below the pre-Great Recession average.
While there’s been improvement, however, there are still 1.5 million homeowners 90 or more days past due on their mortgages but who are not in foreclosure—nearly four times pre-pandemic levels.
There are 1.5 million homeowners who are 90+ days late but who are not in foreclosure? Do you need any more evidence that lenders aren’t interested in foreclosing? They will give loan mods when they get around to it.
Boston condos for sale and the bottom line
Will foreclosures rise in Massachusetts? At this point very unlikely. But time will tell.
- As of this week, 3.7 million borrowers are still in government and private sector mortgage forbearance programs. That’s about 7% of all active mortgages, according to Black Knight, a mortgage technology and data firm.
- The number of seriously delinquent mortgages, that’s at least 90 days past due, more than doubled from May to June, hitting its highest level in more than five years, according to CoreLogic.
It’s a signal that homeowners still need a lot more help in order to recover from the ongoing economic ills of the pandemic. There are also indications that a new foreclosure crisis could be on the horizon.
As of this week, 3.7 million borrowers are still in government and private sector mortgage forbearance programs. That’s about 7% of all active mortgages, according to Black Knight, a mortgage technology and data firm. These plans allow borrowers to delay monthly payments for at least three months and, in some cases, up to a year.
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