Foreclosure Predictions for 2022: Could the Real Estate Market Be in for a Dose of Reality?

Let’s get that crystal ball out for one last dust down in 2021 and talk about foreclosure predictions for 2022. The 2021 real estate market has been skyrocketing due to a pandemic-fueled buying frenzy, which has severely depleted inventory.

However, a possible post-pandemic return to more normal levels is predicted as mortgage rates rise, price gains slow, government intervention reduces, and more supply and less demand come into play.

Foreclosures Will Likely Increase

A recent report from ATTOM Data Solutions states that the current market won’t have to wait long to see an upswing in foreclosure activity since the moratorium on foreclosures was lifted in July 2021. Default notices, bank repossessions, and scheduled auctions spiked by 34% in the third quarter of 2021 and were 67% higher than the third quarter of 2020. Industry gurus seem to be confident that this uptick will continue well into 2022 after nearly 18 months of a foreclosure moratorium.

Todd Teta, chief product officer at ATTOM Solutions, says, “Foreclosure starts are very likely to rise over the next six months to a year, with the increase ranging from a tick to a torrent.”

While the nation is experiencing a huge jump in foreclosure activity, foreclosures are still 70% lower compared to pre-pandemic levels. While it is a possibility that there will be plenty of foreclosures in 2022, the foreclosure prediction is that the amount will be much lower than that of the normal housing market, which means that investors may find a sweet deal on a foreclosure property.

“Despite the increased level of foreclosure activity in September, we’re still far below historically normal numbers,” said Rick Sharga, executive vice president at RealtyTrac, an ATTOM company.

There is still the prediction that foreclosure numbers for 2022 could stay relatively low because of aggressive modifications by lenders coupled with the fact the homeowners have higher levels of equity in their homes. Federal government and private sector relief programs allowed borrowers with financial difficulties to delay their monthly mortgage payments for up to 18 months. The missed payments could be tacked on to the end of loan period or repaid when the mortgage was refinanced or sold.

Many borrowers are now exiting forbearance programs. Borrowers in bailout programs dropped 11% week to week in September 2021, according to Black Knight, a mortgage data and analytics firm.

Another factor affecting foreclosure predictions for 2022 is whether financial institutions will work with borrowers in distress now that the moratorium has ended. A recent statement from Wells Fargo says, “Wells Fargo is here to help homeowners when their payment suspensions are coming to an end, and we are reaching out to engage with our customers through email, letters and by phone.”

“In most cases, customers who were current on their monthly mortgage or home equity payments when the payment suspension started, and are ready to resume those payments, may be able to move missed payments to the end of the existing term loan. Customers will need to call us to discuss potentially moving the payment to the end of the term or to review the other program options for making up the missed payments,” they continued.

Foreclosures Will Provide a Much-Needed Boost to the Housing Market

While foreclosure increases are dramatic, they are coming off the extreme lows that were created by the forbearance programs. “Starts,” which are new foreclosures, usually number around 40,000 per month nationwide, but they fell to as low as 3,000 to 4,000 in the first year of the pandemic when forbearance programs were in full swing.

There could be an increase in zombie properties, which are pre-foreclosure homes left vacant by homeowners who defaulted on their mortgage and mistakenly believe they must immediately move out following a foreclosure notice. These types of properties usually show up in poorer areas where homeowners are more likely to be in financial distress, are less educated in the foreclosure process, and have less money to work out a deal with their lender.

Zombie homes account for one in 13,000 around the US, according to ATTOM Solutions. Lenders will most likely take on the homes that are abandoned first rather than foreclose on homes where they can work out potential deals with borrowers.

Brokers agree that an increase in foreclosure properties coming onto the market in 2022 could provide a needed boost of housing stock, which is still in desperate need of inventory.

Rei Mesa, CEO of Berkshire Hathaway in Florida, states, “I don’t see that as an issue, and in fact, I’d see this as an opportunity for buyers to be able to purchase properties because there is a lot of competition and very few listings.” With the current demand for housing, Mesa thinks that any new listings will be absorbed quickly.

Q3 2021 data reported by ATTOM Solutions says that Florida was among the states with the highest rates of foreclosures, with more than one out of every 2,000 properties in the foreclosure process. The states with the largest numbers of new foreclosures were:

  1. California: 3,434
  2. Texas: 2,827
  3. Florida: 2,546
  4. New York: 1,363
  5. Illinois: 1,362

Part of the preparation for brokers and real estate agents includes honing their skills on foreclosure properties and brushing up on training and certifications that stand out for lenders and banks.

“Once the banks take over the properties, they are going to use those realtors that the lenders are accustomed to working with or have already vetted to handle the listings,” Mesa says.

Be Ready to Act on 2022 Foreclosures

What does an increase of foreclosure properties mean for the investor in 2022? It could mean some great potential deals for flipping or holding investments for passive income.  Some first-time investors may be concerned that their foreclosure investment will never pan out, but if you end up with a great house for the price of a cheap one, you may only need a small redo to recoup your initial investment and make a tidy sum.

Compared to other homes in the neighborhood, you could win a foreclosed home at auction and pay 20-50% less. Once you fix it up and sell it, that could equal a huge pay day! But always make sure you do your due diligence before purchasing a foreclosed home, including title searches, and find a great real estate attorney for your team.

You can come to your own conclusions about 2022 foreclosure predictions, but the market for investors looking for a good foreclosure deal still seems strong. With no federal protections for cash-strapped homeowners, the prediction is that the foreclosure rate will climb higher in 2022. It may lead to great opportunities for potential investors who are looking to capitalize on the purchase of foreclosure properties and buyers who have been priced out of the market over the last 24 months.

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Gina Stern

Gina Stern

Gina Stern is a property investor who has been flipping homes for the past twenty-five years and has had many years of experience in the Real Estate Arena. She is passionate about passing her knowledge and experience onto other investors whether they be newbies or seasoned. Her other great passion is writing, that is why she is very honored to be part of the Property Onion Educational Team. Her specialty has been in commercial investing, mainly investing in shopping centers and strip malls, but she is now excited to be fixing and flipping in retirement communities.

4 thoughts on “Foreclosure Predictions for 2022: Could the Real Estate Market Be in for a Dose of Reality?”

  1. user nameSam Gh says:

    Thank you, Gina for your article, i’m a newbie when it come to foreclosure education and how to get a foreclosed property any information is greatly appreciated. Please can you add any links on where and how to proceed.
    Thank you again

  2. user nameGina Stern says:

    Hi Susan, Thanks so much for enjoying my article! Can I get one of the Property Onion team to reach out to you with more information about the foreclosure process? Please use the contact form on our contact page and I will tell them to look out for an email from you with your personal details.

  3. user nameSirlei Pacheco says:

    Gina is my first time to buy a house or auction tax deed . i need your toughs about

    1. user nameGina Stern says:

      Hi Sirlei,
      May I suggest that you use the contact form on our contact page and one of our customer service team will respond to you with any questions you may have. Property Onion also have an Academy that offers courses to students who need further education on buying at Tax Deed sales so this may be of interest to you too. Good luck!

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