With the shift in the housing market in Sonoma County and beyond during the last half of 2022, some people are concerned that the housing crash of 2008 may be imminent. However, the differences between 2008 and today are both striking and reassuring.
Simply Put, Fewer Homeowners are Behind on Their Mortgages
The last housing crash resulted in over nine million households losing homes
necessitated by foreclosure or short sale. In large part, these staggering numbers were due to relaxed lending practices. This resulted in a wave of distressed properties on the market and caused a sharp decline in home prices.
Today, lending standards have assured that buyers are more qualified, resulting in
fewer borrowers who are behind on mortgages. In fact, the mortgage delinquency
rate fell to its lowest since 1979.
The Last Two Years Have Had Fewer Foreclosures
Context is vital when reviewing Sonoma County foreclosure statistics. Although foreclosures are up, they remain near record lows. During the pandemic, mortgage forbearance allowed homeowners extra time to get their feet underneath them and work out a plan with the lender. Many were worried that after the forbearance ended, a wave of foreclosures would swamp the market. That fear was unfounded and data shows that there are fewer foreclosures happening today than before the pandemic.
Homeowners Have Equity
Due to rapidly escalating home prices in the last two years, many homeowners
today have plenty of equity to sell their homes to avoid foreclosure.
Ksenia Potapov, Economist at First American, says:
“Homeowners have very high levels of tappable home equity today, providing a
cushion to withstand potential price declines, but also preventing housing distress
from turning into a foreclosure. . . the result will likely be more of a foreclosure
‘trickle’ than a ‘tsunami.’”
The Takeaway
Don’t be misled by tantalizing headlines and keep in mind that context is vital as
you interpret market statistics. Foreclosure rates remain well below pre-pandemic
number. And as always, if you have questions, please don’t hesitate to reach out.
I’d love to help you navigate the current market. 707.591.5309
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