The real estate market has been so healthy that foreclosures have not been a factor since the severe downturn in 2007 and 2008. The current downdraft in the market has renewed concerns. A new study shows that in several states, led by South Dakota, fear of foreclosure has jumped. Inflation and a slowing economy finally have caught up with housing.
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The quick turn from a highly successful real estate market to one that has begun to show signs of trouble has simple triggers. One is that mortgage rates have skyrocketed. A year ago, the interest rate on a 30-year fixed mortgage was about 3%. That surged to over 6% recently. Therefore, housing has become more expensive.
A new study shows that 60% of the increase in home prices was due to the ability of people to work from home. Millions of people relocated to cities with a “higher quality of life.” Housing demand in these metropolitan areas rose, pushing home prices to the highest levels on record. The median price of a home sold in the middle of 2022 reached nearly $400,000, which was unimaginable just a few years ago.
Foreclosure worries are usually tied to the cost of living or employment status. In LendingTree’s recently issued Nearly 1 Million Americans Fear They’ll Need to Leave Their Home Due to Foreclosure in the Near Future report, the conclusions were based on the most recent U.S Census Household Pulse Survey, which was in the field from July 27 to August 8.
The data show that 3.71% of adults live in households that are behind on their mortgages. Of these, 19.62% “believe either somewhat or very likely to leave their home due to foreclosure in the next two months.”
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