Will There Be a Wave of Foreclosure Homes?

Since COVID related lock-down ended, housing market has been showing strong recovery. Post Spring/Summer sales number continues to be more impressive than many of us expected. New home sales rose to 2006 level. In August, California median home price rose to slightly over $700,000, 14.5% increase from the same time last year. Median home price in Southern California has seen a 12.9% increase from August, 2019. Even though demands of home buyers haven't subsided at all, a number of buyers also choose to wait and see if there will be a wave of foreclosure homes coming on the market so they can snap a good deal.

The reason behind this approach is because millions of home owners entered forbearance programs that allow them to either not pay mortgage or reduce their mortgage payment during the period of time when they are affected by the pandemic. Some home buyers predict these home owners who are in forbearance might late on default their mortgage all together and their homes can be foreclosed.

However, the recent data from Mortgage Bankers Association showed that the number of home owners entering the forbearance reached the lowest point for the last five months. The portion of the less riskier loans in forbearance has fallen for 15 consecutive weeks. But the loans that bear more risks before entering forbearance will likely to have a hard time to be recovered.

Home owners can still face challenges of making payments on time in the future. Yet the actual number of homes that will be foreclosed can be far less than what we experienced in the last recession in 2008. The significant amount of equity home owners have built up and the high demand of home buyers can provide a great deal of alternatives other than foreclosure. My suggestion to home buyers is to seek the opportunity today, instead of waiting for the perfect deal that might not happen anytime soon.