It’s been a long road, but America is finally creeping out of the shadows of the 2008 economic meltdown that sent home prices tumbling and forced millions of Americans into foreclosure. Not only is the economy growing, but more people are buying homes. Just as important, fewer and fewer people are falling behind on their mortgages.
Here’s a snapshot of the current state of affairs for foreclosures.
According to Consumer Affairs, there were 191,824 foreclosed properties in the U.S. in the third quarter of 2017. That total is 35 percent lower than during the same period last year. It’s also the lowest total reported since 2006, a year before the Great Recession began in 2007 and two years before the market crashed in 2008.
Unemployment is low
When jobs are plentiful, foreclosures are generally rare. Even if economic growth is modest and wages are not increasing rapidly, people are generally able to keep up with their mortgage payments as long as there is not a sudden shock to their economic situation, such as losing a job or having an expensive medical crisis.
Interest rates are low
While they’re starting to climb back again, interest rates have been at historic lows for years, allowing far more Americans to buy homes and pay relatively little in interest on their mortgages. That not only makes it easier to buy a house, but easier to keep up with payments if you lose your job or the economy takes a turn for the worse.
Since the 2008 market crash, a number of new rules have been introduced to crack down on lending practices that targeted sub-prime buyers who were the most likely to default on their mortgages. Most buyers now have to show two years of stable work history, a decent credit score and a debt-to-income ratio of no higher than 43 percent.
In some places, it’s still bad
According to RealtyTrac, only one in every 1903 homes in the U.S. was foreclosed on in October, 2017. In other states, however, things are much worse. The state with the highest foreclosure rate is New Jersey, where roughly 1 in 500 homes were foreclosed on . That’s an even worse rate when compared to the national rate at the height of the recession. Three other states –– Maryland, Delaware, Illinois –– have foreclosure rates that are greater than 1 in 1,000.
Fewer foreclosures means higher home values
Not only is foreclosure a tragedy for the person losing their home, but foreclosed properties can lower the value of surrounding homes. One study found that a nearby home will drop 1 percent in value for every 7 percent the foreclosed property falls in value. Considering that foreclosed homes often sell for well less than if the homeowner had remained, the drop in value can be significant for neighbors.