While you may have seen recent stories about the volume of foreclosures today, context is important.

During the pandemic, many homeowners were able to pause their mortgage payments using the forbearance program.

The aim was to help the owners financially during the uncertainty created by the health crisis.

When the tolerance program began, many experts were worried that this would result in a wave of foreclosures hitting the marketas happened after the real estate crisis in 2008.

See why the number of foreclosures we are seeing today is nothing like the last time.

1. There are fewer homeowners at risk

Today's figures show that the majority of landlords are abandoning their forbearance plan in order to be fully up to date with payments or with a plan from the bank that restructured their loan in a way that allowed them to start making payments again.

The graph below shows these findings of Mortgage Bankers Association (MBA):

Real estate loans after the end of the grace period created during the pandemic

The same MBA report mentioned above estimates that there are approximately 525,000 homeowners who remain in forbearance today. Fortunately, these people still have the chance to work out a suitable payment plan with the servicing company that represents their lender.

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2. Most homeowners have enough capital to sell their homes

For those who are leaving the forbearance program without a plan, many will have capital to sell their homes rather than face foreclosure. Due to the rapid rising house prices In the last two years, the average homeowner has earned record amounts of assets in your home.

Marina Walsh, CMB, vice president of industry analysis at MBA, says:

"Given the nation's limited housing stock and the variety of retention and foreclosure alternatives on the table in various types of loans, . . . Borrowers have more options today to stay in their homes or sell without resorting to foreclosure."

3. There have been fewer foreclosures in the last two years

One of the rarely reported benefits of the forbearance program was that it gave struggling homeowners two extra years to get your finances in order and work out a plan with their lender. This helped avoid the foreclosures that would normally have hit the market if the new forbearance program hadn't been available.

Even when people leave the tolerance program, they still there are fewer foreclosures today than before the pandemic. This means that although there are more executions now compared to last year (when foreclosures were paused), the number is still well below what the real estate market saw in a more typical year, such as 2017-2019 (see the graph below):

413,480 fewer foreclosures in the last 2 years.

The graph below shows the number of consumers with new foreclosures per year.

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4. The current market can easily absorb new listings

When foreclosures hit the market in 2008, they increased the oversupply of homes that were already for sale. Today it's exactly the opposite. The latest Existing Homes Sales Report of National Association of Realtors (NAR) reveals:

"The total housing stock at the end of March amounted to 950,000 units, an increase of 11.8% compared to February and a fall of 9.5% compared to a year ago (1.05 million).

Unsold stock is on a 2.0-month supply at the current sales pace, above 1.7 months in February and below 2.1 months in March 2021."

A balanced market would have a stock of approximately six months. In 2.0 months, the real estate market is severely undersupplied. Even if a million homes come onto the market, there still won't be enough stock to meet current demand.

[mpc_alert font_color="#ffffff" background_color="#2eabbf" padding_divider="true" padding_css="padding-left:20px;"]See an article with more arguments:  3 charts that show we're not in a real estate bubble[/mpc_alert][mpc_icon_column title_font_color="#e4246c" title="Summary" title_margin_css="margin:5px;" mpc_icon__mpc_tooltip__border_divider="true" mpc_icon__mpc_tooltip__padding_divider="true"]If you see the headlines about the rising number of foreclosures today, remember that context is important. While it's true that the number of foreclosures is higher now than last year, foreclosures are still well below the pre-pandemic years. If you have any questions, let's connect to talk about the latest market conditions and what they mean for you.[/mpc_icon_column]

Any doubts?

Now that you know a little more about what's happening in the real estate financing market in the United States, you can consider investing in vacation homes in Orlando. To make the most of all the tips we've given you and go even deeper, you can talk directly to our relationship agents. They are always happy to talk to you to answer any questions you may have about investing in Florida.

In this article, we've covered the topic of the behavior of the real estate market during recessions because it's interesting for those looking to invest in Florida. If you would like to read more content like the one in this article, just stay tuned to our blog.

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