April 15, 2024 | Reading Time: 1.5 Minutes
In 2012, the housing market dynamics were vastly different from previous downturns. Foreclosures were minimal, with delinquencies representing only a fraction of what they were in 2008. Unlike prior crises where foreclosures dominated inventory, this time, there’s virtually no hidden inventory, posing little risk to price stability.
Reflecting on historical data, in 1980, despite a staggering 22 months of inventory in California and high-interest rates at 15%, there was no significant price damage. Conversely, in 2008, despite lower interest rates, foreclosures accounted for a substantial portion of inventory, resulting in significant price declines.
However, the 2024 market situation is unprecedented. With mortgage payments often lower than rent and a high percentage of homeowners holding significant equity, foreclosure rates are unlikely to rise. Even the CARES Act and various state-level measures have contributed to stalling foreclosures, mitigating the risk of a foreclosure wave.
Looking ahead, while sales may decrease, distressed situations are more likely to stem from factors like death, divorce, or illness rather than foreclosures. This may lead to fewer real estate transactions and an extended period of low sales volume.