Why Today’s Foreclosure Numbers Won’t Lead to a Housing Market Crash

With the cost of living on the rise, many people are concerned about how these economic challenges could impact the housing market. Specifically, there’s fear that financial pressures might push more homeowners into foreclosure, potentially triggering a market crash like we saw in 2008. However, the latest data shows a much different—and far more positive—picture. Here’s why today’s foreclosure numbers won’t cause a housing crash.

How Today’s Housing Market Is Different from 2008

To understand why a foreclosure wave isn't imminent, we need to look at how the current market differs from the housing crisis of 2008. According to research from ATTOM, a leading property data provider, the number of homeowners entering foreclosure today is dramatically lower than during the 2008 crisis.

Back in 2008, the housing market was flooded with foreclosures, driving home prices down sharply and destabilizing the entire market. Today, foreclosure filings remain historically low, even though they’ve risen slightly from the record lows of 2020 and 2021. This uptick is largely due to the end of the temporary foreclosure moratoriums put in place during the pandemic. Despite this slight increase, foreclosure rates are still nowhere near the levels that triggered the last housing crash.

Why Are Foreclosures So Low Despite High Living Costs?

With rising costs for essentials like gas and groceries, you may wonder why foreclosure rates are so low. The key reason is homeowner equity. Most homeowners today have significant equity built up in their homes, which acts as a financial buffer during tough times.

Unlike 2008, when many homeowners were underwater—owing more on their mortgages than their homes were worth—today’s homeowners are in a stronger financial position. As Bankrate explains:

“In the years after the housing crash, millions of foreclosures flooded the housing market, depressing prices. That’s not the case now. Most homeowners have a comfortable equity cushion in their homes.”

This equity gives homeowners options. If they encounter financial difficulties, they can often sell their home and avoid foreclosure altogether, allowing them to preserve their financial stability.

What’s Ahead for the Housing Market?

While the higher cost of living is a challenge for many, it’s not driving a foreclosure crisis. The strong equity position of homeowners, combined with a more regulated and resilient lending environment, means the housing market is far more stable than it was in 2008.

Bottom Line

The housing market isn’t heading toward a foreclosure crisis. Despite the rising cost of living, homeowners today are in a far better financial situation than they were during the 2008 crash. With significant equity in their homes, they have more options and are better equipped to avoid foreclosure. If you're concerned about the market, rest assured that today’s conditions are much healthier and more resilient.