It’s no secret that foreclosure rates are rising in 2022. But are foreclosure rates set to rise in 2023? It’s unclear if the trend will continue in this upcoming year; however, there is clear evidence that foreclosures could continue rising next year, leaving lenders in the difficult position of trying to sell homes in a buyer’s market. At the same time, if certain factors were to change or remain stable, foreclosure rates may fall in 2023, if not at the beginning of the year, then perhaps in the second or third quarter of 2023.
Are Foreclosure Rates Set to Rise in 2023?
How Inflation Affects the Odds
The odds are that the foreclosure rate will keep rising for several reasons. One, the Congressional Budget Office expects inflation to rise by 3.1% in 2023. This is far lower than the current 8.3% inflation rate but is still significantly higher than the long-term baseline of 2.3% What’s more, the market is still vulnerable to shocks that could send the inflation rate far higher than the CBO forecast.
The Continued Conflict
An escalation in the Russia-Ukraine conflict, for instance, could send gas prices even higher, thus raising the cost of food and utilities. China’s continuance of its zero-COVID policy, which continually locks down cities that export goods to the United States, could also push prices higher, as can current and future severe weather events such as extreme heat and flooding. As prices rise, the foreclosure rate will continue going up as individuals are unable to cover the cost of mortgage payments.
The Job Market
At the same time, about half of employers in the United States expect to cut jobs this year, leaving many formerly financially stable individuals and families without the means to pay for their current homes. Some may attempt to sell, but it’s not a seller’s market, as rising mortgage interest rates make it hard for aspiring homebuyers to make a purchase.
On the other hand, some see the foreclosure rate remaining stable or even decreasing in the coming year. Many foreclosures taking place this year would have happened in 2020 and 2021 if the Federal government had not put a foreclosure moratorium in place due to COVID-19. Once lenders are “caught up,” the foreclosure rate may stabilize.
Furthermore, experts believe that the FED may lower interest rates next year or at least stop raising rates towards the end of 2022. Lower rates would affect current homeowners who have adjustable-rate mortgages, making it far easier for them to afford payments than it would have been otherwise. There is also the fact that a dip in inflation rates will lower prices, thus lessening the strain on middle-class and socioeconomically disadvantaged homeowners who are currently struggling to make payments.
Predictions for 2023
Foreclosure rates will most likely continue rising in 2023, as the market conditions that brought about this situation are set to remain in place or even worsen in 2023. However, there is still the real possibility that foreclosures may decrease in the coming year if pundit predictions are correct and inflation rates and FED interest rates decrease. Even so, those involved in the real estate industry should bear in mind that market conditions vary depending on geographic location, so even factors that cause foreclosures to rise or fall nationwide may or may not impact certain locations. Contact Peak Foreclosure today to learn more.
- Will Rising Interest Rates Bring More Foreclosures in 2023? – PropertyOnion
- Inflation to last into 2023, says Congressional Budget Office – CBS News
- Fed could cut interest rates in 2023, analysts say, after rate hikes this year (cnbc.com)
- How Long Will Inflation Last? Should Come Down in 2023 (marketrealist.com)