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No, There Won’t Be a Surge of Foreclosures in 2020

With unemployment soaring far higher than ever before in American history, many fear that a housing collapse akin to 2008 is on the horizon. However, despite these concerning numbers, the situation isn’t as dire as it looks. Here’s why we’re probably not going to see a market crash or a surge of foreclosures in 2020.

High Equity Should Protect Us from Foreclosures in 2020

sign for foreclosures in 2020

One of the major drivers of the housing crash in 2008 was its sheer number of foreclosures. And thanks to today’s historic unemployment rates, many wonder if foreclosures in 2020 will follow in the footsteps of 2008. Fortunately, economists think a similar situation is unlikely, largely due to the amount of equity Americans hold today.

Here’s what we mean.

Americans today owe significantly less

piggy bank with money

One of the leading differences between today’s market and the market of 2008 is equity. According to John Burns Consulting, 58.7% of homes in the US have at least 60% equity—a drastically different number from 2008.

How does equity make a difference? When prices dropped in 2008, many owners found that they owed more on their mortgage than their home was now worth. Rather than trying to sell their homes in a short sale, many simply walked away.

Many homes are even mortgage-free

homeowners without a mortgage

The number of Americans who own their homes outright is another bright spark in these (seemingly) dark times. In fact, 42.1% of all homes in the country are mortgage-free—meaning they are not at risk for foreclosure.

Additionally, only a slight 7.3% of American homeowners have less than 10% equity on their homes. And 71.2% of US owners have at least 40% equity.

Homeowners today hold a LOT of equity

a beautiful home in raleigh

But what exactly do those numbers mean in terms of dollars? Data analyst CoreLogic reports that the average equity on mortgaged American homes today is $177,000—that’s not a number any homeowner is going to willingly walk away from or relinquish to foreclosure!

Americans learned from the 2008 crash

spending in a coffee shop

Another major driver in the 2008 housing crash was unwise spending. Thanks to the strength of the market before 2007, many buyers gained a sizable amount of equity in a very short period of time. However, unlike today, those owners didn’t simply wait for their equity to mature. Many used unwise equity loans to fund large purchases—leaving them in a very unpleasant situation when prices dropped.

Today is vastly different. Between 2005 and 2007 (a roughly 3-year span), owners cashed out on $824 billion of home equity. In the last three years from today, owners have cashed out on less than one third of that amount.

Some industries are growing

a nurse in a hospital

While millions of businesses have been shuttered and tens of millions of Americans have filed for unemployment, there is hope on the horizon. In fact, studies show that more than four million initial unemployment filers have already found new jobs. And that’s because a lot of industries—including healthcare, food and grocery, and delivery—have expanded.

It’s important to remember that our current situation is largely temporary. Even now in North Carolina, many businesses have begun to slowly open their doors to the public once more, bringing more and more people back to work.

Questions About What’s on the Horizon for Real Estate in 2020?

This has certainly been a roller coaster year, but that certainly doesn’t mean your home buying or selling goals need to be put on hold. In fact, the more normally we continue to do business, the more quickly life will return to normal.

If you’re thinking of buying or selling in the Raleigh area, Linda Craft & Team is here to help. Contact us today at 919-235-0007 to learn more about how we can put our 350+ years of combined experience to work for you.

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