Foreclosures happen when a buyer can’t pay their mortgage payments and the bank takes back the property to sell on the market. Foreclosures are thought to be a great deal because the banks sell the properties at a lower price generally to just cover the amount left on the loan.
During the last great recession of 2008-2010, there was a record number of homes being taken back by the banks, and many that were being given back to the banks when the owners didn’t want to pay for them anymore. In 2010 there were over 1,600,000 homes being sold at a steep discount and many buyers were able to get their home for a great price.
Starting in 2011 the economy was on the mend and there was a sharp drop in the number of people not able to their payments. The number of foreclosures dropped to 1.1 million homes and has decreased every year since. That story changed last year when we saw the market slow slightly to over two months of inventory and talks of another recession were all around. Major employers around the country starting instituting mass layoffs and interests rates rose significantly (not good news for anyone that chose to take out an adjustable rate mortgage the last few years).
2022 saw an uptick in the number of foreclosures go up 150% from 2021! Sounds like a lot but the number was still less than 2020 foreclosure numbers. We will have to see where the number lands for 2023 but all signs are pointing to foreclosures not coming back. There are three reasons: first, the last foreclosure boom came about because the recession was caused by loans being given out to people who couldn’t afford the mortgages in the first place. That’s not the case today. Secondly, inventory numbers of available homes are still very low at under two months of inventory. Thirdly, buyer demand is still very strong even with higher interest rates. All three of these reasons mean that rather than a homeowner having to give their home back to the bank and having their credit take a hit, they will simply list their home on the market and more than likely be able to sell it quickly to pay off their loan.
So the answer to the question, “Should I wait for foreclosures to increase to enter the home buying market?”, is No. There are very little foreclosures to buy and investors are still wanting to compete with you for them taking away the benefit of yesteryears. Instead, we suggest you find the home you want in the neighborhood you want and compete at that level. That way you still get to watch your home values increase year over year due to the low inventory, but you also have a home you know you love.
Let us know if we can help you start your home buying journey by contacting us here.