In January, there was a seven-fold increase in foreclosure starts than in December. About 33,000 loans were referred to foreclosure according to mortgage analytics company Black Knight. ATTOM Data Solutions also concluded that lenders repossessed 2,634 properties in February, an increase of 70% from last year.
What does this mean for the housing market? This shows that many of the pandemic-related measures to keep Americans in homes have pretty much worn off at this point. Many who were in the government forbearance program got back on their feet and ended their forbearances in 2020 and 2021. Those who remained in forbearance into 2022 are most likely suffering long term financial hardships. “When their forbearance ends, they’re less likely to be able to resume their payments and more likely to end up in foreclosure”, stated Holden Lewis, home and mortgage expert at Nerd Wallet. There are many loans that are coming up on their final forbearance month that are either in loss mitigation or past due after coming out of mitigation, which still may enter foreclosure in the coming months.
This foreclosure uptick also represents the still ongoing economic recovery from COVID-19. We lost 20.2 million jobs in April, 2020 alone as the government imposed wide ranging lockdowns. We have added back 18.8 million jobs, but we are still short of the pre-pandemic levels. January’s foreclosure rate still remains 40% below the value registered before the pandemic. The housing market is still going strong due to record low interest rates (even the almost 5% rates we are now seeing). Due to housing supply being tremendously low, nobody is getting even a foreclosure sale for a steal.