Foreclosures are up, but not raising any red flags yet

Home prices didn’t move much in October, according to the Federal Housing Finance Agency. That’s the second month in a row that home prices have been basically flat. 

Meanwhile another report from the real estate data company Black Knight found that new foreclosures rose 19% in November. 

However, those numbers have yet to offer any reasons for major concern.

Foreclosure activity has been picking up ever since the federal moratorium on foreclosures ended last year.

But Gunnar Blix, director of housing market research at Black Knight, said the number of foreclosures in November was still 30% below where it was before the pandemic.

“There has been slightly more volatility in the month to month numbers. But the level overall is not concerning at this point,” he said.

There are two conditions under which foreclosures would be cause for concern: Rising unemployment and falling home prices, said Odeta Kushi, deputy chief economist at First American.

“Because that means not only have people lost their jobs, and they have this inability to repay, but they also don’t have sufficient equity in their home to be able to sell that home.”

Thing is, unemployment is still low. And even though home prices have been declining or flat recently, “homeowners are just sitting on near-record levels of home equity, that provide a cushion to withstand potential price declines,” Kushi said, adding that we will probably see more foreclosures next year – but it’ll likely be more of a trickle than a tsunami.