WASHINGTON—U.S. housing prices are going through the roof, and a looming wave of foreclosures is unlikely to reverse this trend in the near term due to a severe housing shortage in the country, according to experts.
The foreclosure moratorium for federally backed mortgages is going to end on July 31. The Biden administration extended the national moratorium by a month in June and made clear that this would be “the final extension.”
Some were predicting that there could be a flood of foreclosures once the forbearance program expires, leading to a replay of the housing market crash of 2008.
According to the National Association of Realtors (NAR), as of June, there were roughly 2.7 million homeowners who hadn’t caught up on their mortgage payments and 1.8 million loans that were in serious delinquency, meaning 90 days or more past due and in foreclosure.
However, a majority of homeowners in forbearance (77 percent) have workout options and only a small fraction could end up selling their homes, according to Gay Cororaton, senior economist and research director at the NAR. Thus, she predicts that the impact of foreclosures on supply and housing prices is likely to be minimal.
Based on the Mortgage Bankers Association data from September 2020 through June 13, Cororaton predicts that only about one in 10 homeowners could opt to exit forbearance by selling their home (7.5 percent) or by a short sale or deed-in-lieu (2 percent).
That means nearly 180,000 foreclosed homes could soon hit the market, she told The Epoch Times. While these homes will add some relief to the tight supply of houses on the market, they won’t cause a glut that could slow or reverse the housing boom.
“The house shortage is much more severe; we are underbuilt by about 5.5 million homes,” Cororaton said. “Even if they sell these homes, you will not see a fall in prices, just because of the significant undersupply and tight inventory for homes.”
However, there are likely to be serious challenges facing low-income homeowners as they’re most at risk of foreclosure, according to NAR. This looming risk is expected to further widen the homeownership gap among income and racial groups. – READ MORE
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