Foreclosure filings rose by over 100% last month. How does that impact the market, and opportunities for real estate investors?
Rising foreclosure rates typically sound like negative data trends. It is certainly always sad when someone loses their home. Though it may also be healthy for the overall market. So, how do current foreclosure trends stack up? What is driving them? What is coming next? How do you invest through it, intelligently, and profitably?
The 2022 Foreclosure Surge
ATTOM Data reports that foreclosure filings leapt by 29% month over month from January to February 2022. With foreclosure activity up 129% from February 2021.
Double and triple digit jumps in data used to be eyebrow raising. Though they seem to have become an everyday affair with the extra inflation we’ve been experiencing.
Are More Foreclosures A Good Or Bad Thing?
It’s a tragedy when individuals and families lose their homes. Or when people are sucked into poor investments or fail when attempting to DIY.
Still, the market is currently clamoring for more inventory, and better priced inventory.
More foreclosures, distressed property sales, and motivated sellers could certainly help alleviate problems. It can boost availability of inventory which is very much needed. It could offer better value pricing to both investors and retail home buyers.
In addition to those units currently in foreclosure, there are also the masses of houses that Zillow and Opendoor have piled up, and now need to get rid of. As Zillow announced its failure, it had reported around 7,000 properties it needed to shed. Following this, Opendoor has reported it has been holding $6B worth of homes it hasn’t been able to sell. If Offerpad follows their demise it could mean even more.
That could mean a lot more deals coming up for investors.
Keeping It In Context
A 130% rise in foreclosure filings may sound severe, but it must be kept in context.
We are just coming out of a period of foreclosure moratoriums and court backlogs. So, there could be many more coming. Yet, banks are sitting on almost no REOs. The 25,833 units that received foreclosure notices in February is a tiny fraction of the market. Most may be snapped up prior to bank takeovers or foreclosure auctions, thanks to large amounts of equity.
This data represents around 1 in every 2,500 housing units in cities like Jacksonville and Orlando, FL receiving a foreclosure notice in a single month. Compare that to the 2008 crisis when it was common to see more than 1 in every 400 units in an area in foreclosure.
Investing In The Current Market
There are likely more foreclosures coming. With inflation, rising taxes, and interest rate hikes, current defaults in business and consumer debt could well turn into more mortgage failures.
Providing investors buy smart, with properties with great income potential, and at prices which give them room to flip, there are plenty of opportunities. This brings opportunity to help others, and earn great returns in the process.