A Wave of Foreclosures In Oklahoma and Nationally Is Not On the Way

The pop of the housing bubble 15 years ago is a memory that won’t go away for most people.  With all the headlines talking about forbearance plans coming to an end, many people are hoping and concerned we will see a wave of foreclosures hit the market and that the housing market will crash.   Here are some reasons why that won’t happen, even in Oklahoma.

The amount of homeowners in trouble is considerably less

After the last housing crash, about 9.3 million households lost their homes to a short sale, foreclosure, or because they decided to give it back to the bank.

Last year, as stay-at-home orders were issued, the fear was the pandemic would impact the housing industry in a similar way. There were headlines projecting up to 30% of all mortgage holders would enter the forbearance program. Do you know what really happened?  Only 8.5% actually did, and that number is now down to 2.2%.

As of last Friday, October 29th, 2021,  the total number of mortgages still in forbearance stood at  1,221,000. That is massively less than the 9.3 million households that lost their homes just over a decade ago during the housing crash.

The majority of the mortgages in forbearance can sell their homes without being underwater due to their equity

Due to rapidly rising home prices over the last two years here in Tulsa County and Creek County and across the nation, of the 1.22 million homeowners currently in forbearance, 93% have at least 10% equity in their homes. Do you know what that means?  This is so important because the 10% equity enables homeowners to sell their homes, pay the related expenses, and put money in their pocket instead of giving their house back to the bank or facing the hit on their credit that a short sale or foreclosure would cause. 

Unfortunately, the 7% remaining might not have the option to sell, but let’s look at the math.   If the entire 7% of those 1.22 million homes went into foreclosure, that would total about 85,400 mortgages. Let’s put that number in context, look at the annual foreclosure numbers for the three years leading up to the health crisis:

  • 2017: 314,220
  • 2018: 279,040
  • 2019: 277,520

With the math, the likely number of foreclosures coming out of the forbearance program is nowhere even near the number of foreclosures that affected the housing crash 15 years ago. The numbers are showing us it is less than one-third of any of the three years prior to the world health crisis. 

Those listings coming to the market can be easily absorbed due to the housing shortage we are in

Look at this graph.  Back in 2008, when foreclosures hit the market, there was an abundance of houses for sale. Today we are in the exact opposite situation.  In 2008, we were in a buyers market, the month’s supply of inventory was at over nine months. Today, here in Tulsa County and Creek County that number is less than a two-month supply in Tulsa County and Creek County and less than a three-month supply nationally. Again, look at the graph comparing the two markets.

Bottom Line

The data indicates why Ivy Zelman, founder of the major housing market analytical firm Zelman and Associates, was on point when she stated: “The likelihood of us having a foreclosure crisis again is about zero percent.

The message needs to be heard.  If you are waiting around to buy a house waiting for the market to crash you will likely end up disappointed and it will cost you more money when you do move because experts are projecting home prices to keep appreciating and interest rates to go up as well.  And even more important if you are a homeowner and you need to sell your house because you are out of forbearance please reach out to me so I can help walk you through your options.  The majority of homeowners do not need to let their home go back to the bank due to the massive appreciation we have had over the past two years.   Again, I am Sabrina Shaw, with Homes by Sabrina and eXp Realty, and I am always here to guide and serve you.

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