By Diego Bravo - Realtor® on March 22/2022

Since early 2020, authors have been predicting that because of the economic crash caused by the Coronavirus pandemic, millions of homeowners will NOT be able to pay their monthly mortgage bills because of a rampant unemployment to come, and this will lead to a high volume of foreclosures “soon”. They also have stated that, like in the 2007 recession, the banks will be auctioning  those foreclosed houses at low prices, which will cause a crash in the real estate market and a financial recession again. Some have even advised real estate investors and potential first home buyers to wait and be ready for this to happen “soon” and take advantage of the low prices at which properties will be auctioned. 

In my opinion, these predictions are based only on seeing the current real estate market as part of an infallible repetitive cycle with fixed timing as if it was the price chart of a stock or commodity or an economic index that should replay the financial recession from 2007. Such analysis is simplistic as it does not seem to consider the unique historic elements that have brought us to this point. Let’s review those predictions with the current facts.

It appears that worldwide, we have overcome the hardest phase of the COVID pandemic. And many countries, including the United States, have reactivated their economies. Just look at the recent low levels of unemployment in our country and the millions of job openings still to be fulfilled throughout the nation that are offering to pay higher wages than before the pandemic. So, this indicates that the first prediction above – ‘a rampant forced unemployment caused by the COVID pandemic will lead to many foreclosures’ - is NOT TRUE. And, based on how everything has occurred there are no factual reasons that make us think of this possibility in the near future.

Now, will the homeowners currently unemployed end in foreclosure? Arguably, those millions of people who chose not to work anymore as part as the called “great resignation” have considered their financial situation and most likely will be able to continue paying their mortgages (if applicable to them), for which their houses will not be foreclosed. Unfortunately, those few people who cannot work for whatever particular reasons, may not be able to pay their mortgage and, thus, may lose their homes. However, in a hot job market like this, unemployment tends to be an individual situation, not a trend .

There is one additional element to consider here: I have explained in a previous article how the greatest reason for the real estate prices to be high nationwide is the lack of houses and the slow pace in which new houses are being built to fulfil the high demand. So, how could be imagined that a homeowner, if not being able to pay the monthly mortgage bills right now, would let their home be foreclosed instead of selling it in the open market for a good price, most likely with a profit… And then, going to pay rent somewhere else?

Let’s see this with actual data: Since 2010 (the top of the financial crisis) when 2,871,891 houses were foreclosed, the number of foreclosures nationwide has been dropping every year. In 2019 (pre-pandemic) the foreclosures dropped to 493,066. In 2020 (when the COVID pandemic started in the United States) there were 214,323 foreclosures, which is less than half from the previous year. In 2021 foreclosures continued to drop to 151,153. These numbers prove the second prediction above – ‘the banks will be auctioning  the foreclosed houses at low prices, which will cause a crash in the real estate market and a financial recession again’ – NOT to be true either. Even during the most uncertain years of the pandemic there was no effect of this prediction and, conversely, foreclosures continued to decline.

For this, the third prediction also failed. So, if you have not purchased your own residence and/or investment properties waiting for the millions of foreclosures and subsequent property auctions at low prices that supposedly will come up ‘soon’, I think you will continue to wait for a long while… And those foreclosures and massive auctions may never even come! 

Disclaimer: This article is solely intended for informational purposes and in no way constitutes legal or financial advice. Each person should analyze their particular situation to determine if the information presented here can be applied. Looking for financial advice is recommended before making decisions!

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