With costs going up on nearly everything, it’s easy to wonder how the current economic pressures could impact the housing market. Homeowners and potential buyers alike are asking: Could high prices and budget tightening lead to a surge in foreclosures?
Before jumping to conclusions, let’s dive into the real numbers. The good news is that recent data shows the housing market is nowhere near the brink of a foreclosure wave. Here’s a breakdown of what’s happening and why today’s market is different from the 2008 crash.
How Today’s Housing Market Stands Apart from 2008
To understand why a foreclosure wave is unlikely, we need to take a quick look at what happened during the 2008 housing crash and how things are different now. According to data from ATTOM, a leading property data provider, the number of homeowners entering the foreclosure process is vastly lower than what we saw in 2008. Back then, the market saw a huge spike in foreclosures. Today’s numbers, however, tell a much different story: foreclosure filings are not only lower, but they’ve even decreased slightly in recent reports.
You might wonder why there’s been a slight uptick in foreclosure filings since 2020 and 2021. This increase is largely due to the end of a foreclosure moratorium that was in place during the early pandemic. This moratorium helped millions of homeowners hold onto their homes, which kept foreclosure numbers historically low for those years. But even with that increase, the overall number of foreclosures remains much lower than in 2008.
A crucial factor in this stability is that today’s homeowners have built significant equity in their homes—a massive difference from the conditions leading up to the 2008 crisis. In those days, many homeowners owed more on their mortgages than their homes were worth. By contrast, most homeowners now have a strong equity cushion. As an article from Bankrate highlights:
“In the years after the housing crash, millions of foreclosures flooded the housing market, depressing prices. That’s not the case now. Most homeowners have a comfortable equity cushion in their homes.”
This built-up equity acts as a protective barrier for homeowners who may face financial difficulties. It means that if someone is struggling with payments, they often have the option to sell their home rather than face foreclosure. In other words, today’s homeowners have more choices—and a far better financial foundation—than those affected by the 2008 crisis.
Rising Living Costs and the Outlook for the Housing Market
While there’s no question that higher costs across the board are affecting people’s budgets, it doesn’t mean the housing market is headed for a crash. From food to gas, expenses may be eating into monthly budgets, but the overall outlook for real estate remains positive. That’s because today’s housing market benefits from significant homeowner equity, which helps reduce the risk of widespread foreclosure.
Here’s how the equity cushion impacts the current situation:
- Reduced Foreclosure Filings: Homeowners are in a much stronger financial position because they can rely on their built-up equity if they run into tough financial times.
- More Market Stability: Since fewer people are entering foreclosure, the market isn’t likely to experience a sudden influx of homes for sale that would depress prices.
- A Balanced Market for Buyers and Sellers: The added stability benefits everyone. Buyers aren’t facing a flood of foreclosures, and sellers are more likely to retain their home’s value.
What This Means for Brookings Homeowners and Buyers
For those in Brookings and the surrounding South Dakota area, it’s natural to feel concerned about rising costs. But it’s equally important to look at the bigger picture. Unlike the 2008 crisis, today’s market is built on a stronger foundation, with homeowners who generally have more options if they run into financial difficulties. Whether you’re considering buying, selling, or staying put, the market’s stability is a good sign that real estate remains a wise long-term investment.
If you’re thinking about buying a home, today’s market conditions mean there’s less competition with foreclosed properties, and you’re less likely to see home values fall dramatically. And if you’re a current homeowner, the equity you’ve built up not only protects your financial future but also contributes to the overall resilience of the local market.
Bottom Line
With rising living costs, it’s easy to get concerned about the housing market’s future. However, the data shows we’re not on the brink of a foreclosure crisis. Today’s homeowners are in a stronger financial position, thanks to significant equity in their homes, which provides a safety net. If you’re considering a move, or simply want to understand what’s happening in the Brookings housing market, let’s connect. Having a trusted, knowledgeable agent on your side can help you navigate the market confidently and strategically.
Posted by Shane Andersen on
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