Foreclosure Starts Soar While Pending Home Sales Sink

Zinger Key Points
  • While the national foreclosure rate rose to its highest level since May 2021 (0.28%), it was also nearly 40% below its pre-pandemic level, with foreclosure sales (completions) 70% under the January 2020 levels.
  • January is the third consecutive month with declines in pending home sales. On a year-over-year basis, transactions dropped 9.5%.

The U.S. housing market appears to have begun 2022 on the wrong foot, with newly published data on January activity reporting foreclosures at their highest levels in two years while pending home sales continue to decline.

What Happened: On the foreclosures front, Black Knight, Inc. BKI reported that home foreclosures starts totaled 32,900 in January, a 702.44% spike from December and a 457.63% upswing from one year earlier.

Black Knight noted this was not entirely unexpected, as borrower protections put into place at the start of pandemic era expired at the end of December. Furthermore, roughly half of the month's foreclosure starts were among borrowers who were already delinquent prior to the pandemic and half involved borrowers who became past due in March 2020 or later.

While the national foreclosure rate rose to its highest level since May 2021 (0.28%), it was also nearly 40% below its pre-pandemic level, with foreclosure sales (completions) 70% under the January 2020 levels. And January's foreclosure start volume was also more than 20% below the 42,800 level in pre-pandemic January 2020.

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What Else Happened: Separately, the National Association of Realtors (NAR) reported its Pending Home Sales Index (PHSI) fell in January from the previous month by 5.7% to 109.5; a 100 index is equal to the level of contract activity in 2001. January is the third consecutive month with declines in pending home sales. On a year-over-year basis, transactions dropped 9.5%.

“With inventory at an all-time low, buyers are still having a difficult time finding a home,” said Lawrence Yun, NAR’s chief economist, who warned that rising home prices and interest rates will work against the plans of many potential buyers.

“Given the situation in the market – mortgages, home costs and inventory – it would not be surprising to see a retreat in housing demand,” Yun said.

Also Happening: January also represented the winter of discontent for many homebuyers. Redfin RDFN reported a record 32.4% of the users of its online site were looking to move to a different metro area last month. The previous peak was 31.5% in the first quarter of 2021.

Miami was the most popular migration destination among the major metros, followed by Phoenix, Tampa, Sacramento and Las Vegas.

“I predict the share of homebuyers looking to move to a different area will continue to rise throughout the year,” said Redfin Chief Economist Daryl Fairweather.

“With mortgage rates going up and rents skyrocketing, moving somewhere more affordable is one of the only ways for many Americans to stay within their housing budget. Even workers who are unable to work from home should feel confident about finding a job in a new location with the tight labor market.”

Photo: Pixabay.

Posted In: ForeclosuresHomeownershipHousingNational Association of RealtorsPending Home SalesrelocationNewsReal Estate