Will foreclosure be more likely in a recession?

On Behalf of | Jul 8, 2022 | Firm News

There’s been talk lately that the United States could be in for a recession over the next year. Things are fluid and always changing, but there’s the potential that there could be another economic downturn. Whether or not it will be as bad as the one in 2007/2008 remains to be seen.

What is known is that the last recession led to nearly 4 million foreclosures. This was just between 2007 and 2010, so they were happening very quickly. If the U.S. is moving toward another recession, is this going to happen again?

Housing prices are very high

One thing that 2007 has in common with 2022 is that housing prices have gone up dramatically. The last time that this happened, the bubble burst and a lot of the property values fell. This meant that many homeowners were not only making less money, but also owed far more money on their homes than those homes were actually worth on the open market. This led them to go through foreclosure or simply walk away from their homes.

Home prices are once again very high, so there is the potential that this could happen. This is a slightly different type of housing bubble than before, in the sense that it has been driven by high demand and low supply. So we may not see the same exact decline, but a recession could very well mean that people who bought homes over the last two or three years won’t be able to afford those large mortgages due to a reduced income.

If this means that you are going to be facing foreclosure, you need to make sure you know about all of your legal options.