Ever since the start of the pandemic, the housing market has been in a weird and crazy place. One of the most common concerns that you might have heard about is the rate of foreclosures on homes.
Today, I want to examine just how much the pandemic has had an effect on foreclosure rates.
Since 2020, it seems like everybody has been talking about the upcoming foreclosures that are just around the corner. Even just a couple of days ago, I saw an article that said that foreclosure filings are up 139% from where they were a year ago. This is certainly a scary thought, but you need to realize that foreclosure rates have been historically low throughout the pandemic.
Even though foreclosure filings have increased nearly 140% from 2021, the rate is still much lower than it was before the pandemic started.
In 2019, approximately 493,066 homes were foreclosed in the United States. These homes represented nearly .36% of all housing units in the US. In 2021, the foreclosure filing rate dropped to .11% which is the lowest it has been in over 16 years. (Source)
Because the foreclosure rate has reached historic lows during the past few years, it is not surprising to see numbers rising back up. It is likely that these numbers will continue to rise over the course of the year. Even if this happens, the rate will probably not reach pre-pandemic levels. (Source)
Even though the headlines may tell you that foreclosure rates are increasing at a rapid rate and that it is something to worry about, it is important to keep in mind that foreclosures have been at an all-time low for the past few years. Even a 140% increase in foreclosures will keep us below the foreclosure rate that we saw prior to the start of the pandemic.
Part of this may have to do with human kindness. It’s possible, and even very likely, that many who may have expected foreclosures were shown forgiveness and extended grace at least for a period of time during the pandemic.
Another reason that foreclosures largely stopped happening was that at the end of the day, banks do not want to foreclose on a house. It costs a bank upwards of $40,000 to foreclose on a house. If they have to turn around and sell that house or put it on the market, it can cause even more problems for them because that’s not their usual job so they are not efficient at it.
If a bank can avoid foreclosing on a house, they will. If they can find a way to keep you in your house, they are more than happy to do so. Many people throughout 2020 were allowed to rework their loans so that they could meet their monthly payments.
I don’t need to tell you that the pandemic has had many negative effects on the world, but it would be incorrect to say the pandemic has negatively impacted foreclosure rates. In fact, the opposite is true. The rate of foreclosures since the start of 2020 has been historically low. Even a seemly large increase in foreclosures will keep us below the foreclosure rates that we saw before the pandemic.