The number of people experiencing foreclosure increased by approximately one third this October, compared to the same time last year. This significant increase in foreclosures is attributed to the lingering effects of the COVID-19 pandemic, with many courts still sorting through related litigation. Fortunately, however, experts have said that a 2008-style crash of the housing market is unlikely.
Foreclosures Up Since Last Year
The number of foreclosures across the United States went up by 34% this October, compared to the same time in 2022. This meant that approximately one in every 1,121 properties was currently in foreclosure, about the same level it was at prior to the COVID-19 pandemic. However, the total number of foreclosures was actually down in the third quarter of 2023, indicating that this trend may already be on the decline.
The Aftereffects of the Pandemic
This relatively high number of foreclosure filings has been attributed to the aftereffects of the pandemic, when foreclosures were halted as part of widespread moratoriums. After those emergency measures ended, however, the courts became inundated with foreclosure filings. In many ways, the current high levels of foreclosures are simply the courts working through the backlog accumulated during the pandemic.
Little Fear for the Housing Market
Despite the overall higher rate of foreclosure, experts are not concerned that there will be a crash in the housing market like there was in 2008. This is because many of the riskier lending practices that enabled the housing bubble in the mid-2000s have been prohibited. In addition, there are many more buyers than sellers right now, eliminating the risk that supply will substantially outpace demand.
What This Means For the Future
As far as most people are concerned, this set of events is simply the COVID-19 pandemic catching up with the housing market. However, there are still concerns about the market thanks to low inventory and high interest rates. At least when it comes to the foreclosure rate, though, it is likely that these issues will resolve themselves with minimal economic disruption.
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