‘Dramatic increase.’ Foreclosure filings are up more than 150%. Here’s what that tells us about the housing market

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There has been a big uptick in foreclosure filings, but the reasons may surprise you.

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The number of foreclosure starts — which is when the first public foreclosure notice happens — is up 219% since the start of the year, according to real estate data analytics firm ATTOM Data Solutions’ midyear 2022 US Foreclosure Market report. What’s more, the number of properties that had foreclosure filings (this number includes foreclosure starts) is up 153% from the same time period last year.

What’s more, 96% of major metro areas saw an annual increase in foreclosure filings, with the highest foreclosure rates in Illinois, New Jersey and Ohio. And when it comes to the number of foreclosure starts, California topped the list, followed by Florida, Tennessee, Illinois and Ohio.

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“Foreclosure activity across the United States continued its slow, steady climb back to pre-pandemic levels in the first half of 2022,” says Rick Sharga, executive vice president of market intelligence at ATTOM. “While overall foreclosure activity is still running significantly below historic averages, the dramatic increase in foreclosure starts suggests that we may be back to normal levels by sometime in early 2023,” says Sharga. ,See the lowest mortgage rates you can get here,

What does this uptick in foreclosures mean for the housing market?

Foreclosures are shooting up as the various foreclosure moratoriums that kept people in their homes during the worst of the pandemic’s economic disruptions have now ended, explains Danielle Hale, chief economist at Realtor.com. That said, they are shooting up from extremely low levels, she adds — noting that even after the sharp increase in foreclosure activity observed in the first half of 2022, we’re still not back to 2019’s low pre-pandemic mid-year total.

“Much like the sharp turnaround in housing inventory that we’ve observed in the number of for-sale homes recently, when the market has tilted in one direction very extremely, we see a huge percentage increases when the trends shift back in a different direction, even though in many aspects what we’re witnessing is just a return to something resembling what was once normal,” says Hale.

Indeed, “it’s important to note that many of the foreclosure starts we’re seeing today — in fact, much of the overall foreclosure activity we’re seeing right now is on loans that were either already in foreclosure or were more than 120 days delinquent prior to the pandemic,” says Sharga. Indeed, many of these loans were protected by the foreclosure moratorium put in place by the government during the pandemic — therefore just halting the inevitable by a couple of years. Greg McBride, chief financial analyst at Bankrate says, “Foreclosure activity is returning to normal levels after being artificially depressed by pandemic-induced payment relief programs and extended foreclosure moratoriums. In a historical context, foreclosures are still very low.”

And while these foreclosure numbers sound dramatic, Holden Lewis, home and mortgage expert at NerdWallet, says it’s not enough to make a dent in the housing market or the overall economy. “Even a healthy housing market has foreclosures, and this pace is nothing to worry about,” says Lewis.

What does this mean for buyers?

While foreclosures remain unfortunate for the owners of those homes, for shoppers who have been frustrated by the lack of homes for sale in their budget, the increase in foreclosures could bring additional options, says Hale. “But much like the increases we see in for-sale housing inventory, it’s just the first step. We would need to see many more months of these increases before home shoppers will feel like they have an abundance of homes to choose from,” says Hale. ,See the lowest mortgage rates you can get here,

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