The Housing Market – The Truth Behind the Headlines

There are a lot of questions right now regarding the housing market as we head into 2022. The forbearance program is coming to an end, and mortgage rates are beginning to rise.

With all of this uncertainty, anyone with a megaphone – from the mainstream media to a lone blogger – has realized that bad news sells. Unfortunately, we’ll continue to see a rash of troublesome headlines over the next few months. To make sure a headline doesn’t paralyze you, turn to reliable resources for a look at what to expect from the housing market next year.

There are already alarmist headlines starting to appear. Here are two recent topics you may have seen in the news.

1. The Housing Market and Foreclosures 

Several headlines are circulating that call out the rising foreclosures in today’s real estate market. Those stories focus on an overly narrow view on that topic: the current volume of foreclosures compared to 2020. They emphasize that we’re seeing far more foreclosures this year compared to last.

That seems rather daunting. However, though it’s true foreclosures have been up over the 2020 numbers, it’s important to realize that there were virtually no foreclosures last year because of the forbearance plan. If we compare this September to September of 2019 (the last normal year), foreclosures were down 70%, according to ATTOM.

Even Rick Sharga, an Executive Vice President of the firm that issued the report referenced in the above article, says:

“As expected, now that the moratorium has been over for three months, foreclosure activity continues to increase. But it’s increasing at a slower rate, and it appears that most of the activity is primarily on vacant and abandoned properties, or loans in foreclosure prior to the pandemic.”

Homeowners who the pandemic has impacted are not generally the ones being burdened right now. That’s because the forbearance program has worked. Ali Haralson, President of Auction.com, explains that the program has done a remarkable job:

“The tsunami of foreclosures many feared in the early days of the pandemic has not materialized thanks in large part to the swift and decisive foreclosure protections put in place by government policymakers and the mortgage servicing industry.”

Rohit Chopra, the Director of the Consumer Financial Protection Bureau (CFPB)

And the government is still making sure homeowners have every opportunity to stay in their homes. Rohit Chopra issued this statement just last week:

“Failures by mortgage servicers and regulators worsened the impact of the economic crisis a decade ago. Regulators have learned their lesson, and we will be scrutinizing servicers to ensure they are doing all they can to help homeowners and follow the law.”

2. The Housing Market and Rising Mortgage Rates 

Another topic that’s generating frequent headlines is the rise in mortgage rates. Some people are expressing concern that rising rates will negatively impact the housing market by causing home sales to decline dramatically. The resulting headlines are raising unneeded alarm bells. To counteract those headlines, we need to take a look at what history tells us. Looking at data over the last 20 years, there’s no evidence that an increase in rates dramatically forces sales to come to a halt. Nor does home price appreciation come to a screeching stop. Let’s look at Home Sales first:

The last three times rates increased (shown in the graph above in red), sales (depicted in blue in the graph) remained rather consistent. Indeed, sales fell rather dramatically from 2007 through 2010, but mortgage rates were also falling at the time. The next two instances showed no meaningful drop in sales.

Now, let’s take a look at home price appreciation (see graph below):

Again, we see that a rise in rates didn’t cause prices to depreciate. Outside of the years following the crash, prices continued to appreciate, just at a slower rate.