Foreclosures in California dropped dramatically during the Pandemic, but why? Due to Stay-at-Home orders, there was a Federal Moratorium on landlords evicting tenants due to the inability to go to work. Although most of us want to forget those early days of the Pandemic, do you remember how all the restaurants, health gyms, etc. were shut down? The government wanted to protect their citizens from eviction since those employees were not being paid, as the brick and mortars were sucking air trying to survive the unseasonably low revenue.
At the start of the pandemic, foreclosures were down 70% compared to 2019. As of today, foreclosure filings are up 6% compared to the previous quarter and 22% in the past year. More than six million mortgages were in forbearance for some or all of the past year. Most of those homeowners have now exited forbearance, either through modification, by catching up skipped payments, by resuming their regular payments, or because they continued to make payments during the forbearance period. When the Federal Foreclosure Moratorium ended July 31, 2021, naturally foreclosures increased because the protection of skipping payments to landlords was obsolete. But the sudden increase in Foreclosures highlighted by the media, is not something you should believe. With home values rising, many homeowners who may have found themselves facing foreclosure under other circumstances have been able to leverage their equity and sell their houses rather than face foreclosure. Moving forward, equity will continue to be a factor that can help keep people from going into foreclosure.
But just because foreclosures are up doesn’t mean the housing market is in trouble. As Clare Trapasso, Executive News Editor at Realtor.com, says:
“There’s no reason to panic, at least not yet. Foreclosure filings began ticking up . . . after the federal foreclosure moratorium ended. The moratorium was enacted in the early days of COVID-19, when millions of Americans lost their jobs, to prevent a tsunami of homeowners losing their properties. So some of these proceedings would have taken place during the pandemic but got delayed due to the moratorium. This is a bit of a catch-up.”
Basically, there’s not a sudden flood of foreclosures coming. Instead, some of the increase is due to the delayed activity explained above while more is from economic conditions. As Rob Barber, CEO of ATTOM,explains:
“This unfortunate trend can be attributed to a variety of factors, such as rising unemployment rates, foreclosure filings making their way through the pipeline after two years of government intervention, and other ongoing economic challenges. However, with many homeowners still having significant home equity, that may help in keeping increased levels of foreclosure activity at bay.”
To better demonstrate the increase in foreclosures to the 2008 Great Recession, refer to the graph below.
The moral of the story, the media can stir the pot and they have a mass audience to do so. But don't believe everything you hear. The data is skewed by the facts above.