Foreclosure activity in the U.S. remains low due to the continuation of moratoriums ordered by federal and state governments in the early stages of the coronavirus pandemic, even as mortgage delinquencies rise.
“It’s inevitable that there will be a significant increase in foreclosures once these moratoriums have expired, although it’s unlikely that we’ll see default rates reach the levels we saw during the Great Recession,” said Rick Sharga, executive vice president at real estate data firm RealtyTrac.
RealtyTrac reported last week that 8,892 homes received a foreclosure filing in July, a number that includes default notices, scheduled actions and bank repossessions. That’s down 83% from one year ago, according to the report. Nationwide, just one out of every 15,337 homes had a foreclosure filing in July.
In the previous month, just 3% of sales involved foreclosures and short sales, according to National Association of Realtors’ data.
With foreclosure moratoriums still in place, another wave of foreclosures likely won’t materialize until at least next year, after the maximum 12 months of mortgage forbearance expires for homeowners. Economists say if homeowners are able to return to work in that time, the economy won’t need to fear a foreclosure crisis. Still, some impact is inevitable once moratoriums expire, housing analysts note.
“Will there be some fallout? Of course,” Matthew Gardner, chief economist of Windermere Real Estate, told realtor.com last month. “But I don’t think it will be enough to cause [housing] prices to drop.”
The RealtyTrac report noted that the states with the highest foreclosure rates are Delaware (one in every 6,489 housing units with a foreclosure filing); South Carolina (one in every 7,328 housing units); Maine (one in every 7,542 housing units); New Mexico (one in every 8,255 housing units); and California (one in every 9,194 housing units).