You may have noticed recent headlines about rising foreclosures. If that makes you nervous about the possibility of another housing crash, here is what you need to know.
According to ATTOM, more than nine million people went through some type of distressed sale between 2007 and 2011 during the last housing crisis. By comparison, just over 300,000 distressed sales took place last year.
Even though foreclosures have increased recently, today’s numbers are far below what we saw back then. So what does the future look like? The short answer is, we are not headed for a wave of foreclosures.
Why Mortgage Delinquencies Matter
Industry experts track mortgage delinquencies, which are loans more than 30 days past due, as an early sign of future foreclosure activity. Current delinquency data is reassuring for the market as a whole.
Right now, delinquency rates are holding steady compared to the end of last year. That means we are not seeing the kind of increases that would normally raise red flags.
Still, there are details worth watching. Marina Walsh, Vice President of Industry Analysis at the Mortgage Bankers Association, explains:
“While overall mortgage delinquencies are relatively flat compared to last year, the composition has changed.”
At the moment, borrowers with FHA loans make up the largest share of new delinquencies (see graph below):
Why FHA Loans Are More Affected
FHA borrowers tend to be more sensitive to changes in the economy. With ongoing concerns about inflation, recession, and employment, it is not surprising that this group is feeling the pressure more than others.
That said, the graph also shows that while FHA delinquencies are elevated, other loan types remain stable at low levels. During the last housing crash, delinquency rates were much higher across all loan categories.
This difference shows that today’s mortgage market is in a much stronger position than it was in 2008. As ResiClub says:
“The recent uptick in mortgage delinquency seems to be concentrated among FHA borrowers, however, mortgage performance remains very solid when viewed in light of the twenty-year history of our data.”
Regional Insights on FHA Loans
Another important factor is that FHA loans represent only about 12% of all mortgages nationwide. Local data matters, though. Some areas, particularly in the South, have a higher concentration of FHA loans.
The map below highlights states with larger FHA loan volumes.
This is not a measure of delinquencies, but simply where these loans are most common.
The Federal Reserve Bank of New York explains:
“Looking at geographic concentrations of loans, recent data indicate that a higher proportion of mortgage balances are delinquent in many of the southern states . . . we see that higher delinquency rates coincide with a higher share of FHA loans across states.”
Even so, delinquency rates today are nowhere near the levels of 2008. This is not a sign of a looming crisis, though it is something experts will continue to monitor closely.
If You Are Facing Financial Challenges
No one wants to deal with the possibility of foreclosure. If you are struggling to make payments, remember you are not alone and you do have options.
Start by reaching out to your mortgage provider. Many lenders can offer repayment plans or loan modifications to help you stay on track. In addition, homeowners today often have significant equity in their properties. Selling could be a way to avoid foreclosure and protect your investment.
Bottom Line
While foreclosures have ticked up slightly, they are nowhere near the levels of the last housing crash. Current delinquency data does not point to a market crisis ahead.
This is an area that industry professionals will continue to follow. If you want to stay informed, let’s connect so you always have the most up to date information.
Vesta Schneider
Realtor®
Luxury Homes | Relocation | Investments
Keller Williams Realty McKinney
📞 302-530-7314
📧 vestaschneider@yahoo.com
