The housing market is out of control in many areas of the country, with record-high home prices and record-low inventories. Prices had been steadily increasing since 2012, but they’ve accelerated since the onset of the COVID-19 pandemic.
The rapid run-up in prices has led economists at the Federal Reserve Bank in Dallas to warn that the housing market could be in the midst of a bubble. Similar to the runup to the 2007 recession, housing prices since 2020 have risen faster than you’d expect based on measures of income, rent, and interest rates.
Could it be a sign of a bubble? And, if it bursts, can we expect the fallout to be as bad as it was the last time this happened?
Signs of a housing bubble: Is the patient running a fever?
The Dallas Fed diagnosed the housing market using a measure called price-to-rent ratio, which compares the prices of houses to the “fundamental” value of housing based on how much you’d expect to earn if you rented a house out to tenants. This house-price-to-rent ratio also includes variables like disposable income per capita, housing rents, and long-term interest rates.
Compared to this benchmark, prices have soared above what you’d expect based on economic conditions since 2020. The Dallas Fed also observed that housing prices are similarly inflated compared to disposable income.
While it may be too early to say whether the housing market is in a bubble, these stats merit a close watch, says Enrique Martinez-Garcia, senior research economist and advisor for the Dallas Fed.
“Economic theory suggests one of the most prominent causes of such explosive behavior is the emergence of a bubble,” Martinez-Garcia says. “We can tell which periods have experienced exuberance, another word to refer to a likely episode of exploding house prices, the same way that we can tell a patient is running a fever — because we are able to compare the ‘heat’ of the market in a given period with the range of growth rates that would be expect in normal times.”
If there’s a bubble, when will it burst?
Sourav Batabyal, a professor of finance and economics at Coastal Carolina University, expects housing prices to cool in the near future. The pandemic-related factors that drove up demand (lots of apartment dwellers seeking more space) and prices (supply chain issues that kept more houses from being built) will eventually go away.
The low interest rates that have allowed buyers to get cheap mortgages are also going away. The average rate for a 30-year fixed-rate mortgage hit 5% in April, and rates should continue to rise as the Federal Reserve tries to control inflation.
“House prices may still continue to increase, but they will increase at a slower rate,” Batabyal says.
While the last housing boom led to a spectacular bust, that doesn’t mean a similar collapse is in store this time.
“First, the banking and financial system are better positioned now and healthier,” Martinez-Garcia says. “The balance sheets of households are also in better shape.”
The housing crash of 2007-09 was driven in part by loose mortgage standards, Batabyal says. Lenders have since become stricter about handing out mortgages, and as a result, mortgage payments make up a smaller percentage of disposable income for the country.
Martinez-Garcia added that there are more resources dedicated to monitoring the housing market for signs of “housing market fever.”
Because of this, lenders may become even more strict as these signs become more clear, and policymakers may be able to act sooner to cool down the market.
This scenario may already be unfolding. The Federal Reserve has signaled that it will raise interest rates multiple times over the rest of 2022. If the central bank corrals inflation without causing too much harm to the economy, the housing market can avoid a crash. But that’s a big if.
“Although a bust in housing does not appear likely with the evidence we have seen so far, it is not out of the realm of possibilities either,” Martinez-Garcia says.
He added that he would keep a close eye on how the market reacts to higher mortgage rates.
That could mean it’s a good idea to wait if you’re looking to buy your first house, Batabyal says. Housing prices could settle over the next few years if higher mortgage rates reduce demand and more houses get built. However, your financial situation and your living situation are ultimately the biggest determinants of whether you should sit tight.
This article originally appeared on Policygenius.com and was syndicated by MediaFeed.org.
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These states have been hit hardest by rising foreclosures
The number of U.S. properties with foreclosure filings in February was 25,833, according to ATTOM Data Solutions. This is up 129% from February last year when foreclosure activity remained low due to the pandemic-related moratorium on foreclosures. The Biden administration’s final extension of the moratorium on foreclosures ended July 31, 2021. The extension of the evictions moratorium for foreclosed borrowers ended September 30, 2021.
It is also worth noting that foreclosure filings increased by over 11% from January to February. This rise follows the roughly 29% increase in foreclosure filings that occurred from December 2021 to January 2022. The researchers at ATTOM report that this month-to-month, double-digit increase is in line with expectations and will likely continue for at least the next six months.
After two years of historically low foreclosure numbers due to government and industry programs designed to protect homeowners financially impacted by the pandemic, these increases signify the gradual return to normal levels of foreclosure activity.
February is now the eighth consecutive month showing an annual increase in foreclosure activity. According to ATTOM, year-over-year foreclosure increases will likely continue for the rest of 2022; however, they still expect foreclosures to stay below historic levels through the end of the year. Read on for the foreclosure rates in February 2022 – plus the five counties with the highest rates within those states.
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As just noted, foreclosures are up from last month, and up even more significantly compared to last year. Read on for February foreclosure rates for all 50 states — plus the District of Columbia — beginning with the state that had the lowest rate of foreclosure filings per housing unit.
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Ranking in population between Alaska and Vermont, the country’s 48th and 49th least populated states, Washington, D.C. had 19 foreclosures in February. With a total of 315,176 housing units, Washington, D.C.’s foreclosure rate was one in every 16,588 households, putting it in between the states of Montana (#44) and Kansas (#43).
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South Dakota ranked 50th with five homes going into foreclosure. Having 388,569 total housing units, the fifth least populated state had a foreclosure rate of one in every 77,714 households. The most foreclosures per housing unit were in counties (from highest to lowest): Walworth, Butte, Lincoln, Pennington, and Minnehaha.
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In February, North Dakota’s foreclosure rate was one in every 37,306 homes. That puts the fourth least populated state – with a total of 373,063 housing units, of which 10 were in foreclosure – in 49th place. The counties with the most foreclosures per housing unit were (from highest to lowest): Nelson, Barnes, Ward, Cass, and Burleigh.
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Alaska saw 10 foreclosures, making the foreclosure rate one in every 31,467 homes. That caused the third least populated state, with a total of 314,670 housing units, to take the 48th spot. With only three counties seeing foreclosures, the counties that had the most foreclosures per housing unit were (from highest to lowest): Kenai Peninsula, Matanuska-Susitna, and Anchorage.
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The 38th most populated state, West Virginia, ranked 47th. It has 892,182 homes, of which 33 went into foreclosure. That means the foreclosure rate was one in every 27,036 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Grant, Wayne, Hancock, Marshall, and Lewis.
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In 49th place for population, Vermont claimed the 46th spot for foreclosure rate. Of Vermont’s 334,999 housing units, 13 homes went into foreclosure for a rate of one in every 25,769 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Windham, Bennington, Rutland, Washington, and Addison.
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The 27th most populated state ranked 45th for highest foreclosure rate. Of Oregon’s 1,768,901 homes, 73 went into foreclosure, making for a foreclosure rate of one in every 24,232 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Douglas, Clackamas, Washington, Coos, and Klamath.
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The 44th most populated state also ranked 44th for foreclosure rate. This is the same ranking the state held in January. With 26 foreclosures out of 510,180 housing units, its foreclosure rate was one in every 19,622 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Blaine, Richland, Custer, Fergus, and Yellowstone.
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Kansas took the 43rd spot in February. With 1,273,297 homes and a total of 78 housing units going into foreclosure, the 35th most-populated state’s foreclosure rate was one in every 16,324 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Geary, Seward, Sherman, Cowley, and Brown.
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With a total 1,983,949 housing units, Kentucky saw 134 homes go into foreclosure, and held the same ranking from January. That put the foreclosure rate for the 26th most populated state at one in every 14,806 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Trimble, Hardin, Boyd, Union, and Greenup.
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Ranked 13th for most populated state, Washington came in 41st place for highest foreclosure rate. It has 3,106,528 housing units, of which 244 went into foreclosure, making the state’s foreclosure rate one in every 12,732 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Asotin, Pacific, Snohomish, Douglas, and Grays Harbor.
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In Tennessee, the 16th most populated state, there were 249 foreclosures out of 2,963,486 housing units. That put the foreclosure rate at one in every 11,902 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Moore, Rhea, Cocke, Sequatchie, and Carroll.
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The 39th most populated state, Idaho had 62 homes go into foreclosure. With 723,594 total housing units, the state’s foreclosure rate was one in every 11,671 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Payette, Franklin, Teton, Bonneville, and Washington.
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The 41st most populated state, New Hampshire ranked 38th for highest foreclosure rate. Of 634,726 homes, 56 went into foreclosure, making for a foreclosure rate of one in every 11,334 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Merrimack, Cheshire, Strafford, Rockingham, and Belknap.
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Ranked 22nd for most populated state, Minnesota took the 37th spot for highest foreclosure rate. It has 2,438,203 housing units, of which 219 went into foreclosure, making the state’s foreclosure rate one in every 11,133 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Wright, Rock, Washington, Pipestone, and Murray.
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Ranked the least populated in the country, Wyoming claimed the 36th spot for highest foreclosure rate. With 276,846 housing units, of which 26 went into foreclosure, the state’s foreclosure rate was one in every 10,648 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Campbell, Washakie, Johnson, Big Horn, and Converse.
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Ranked 32nd for most populated state, Arkansas took the 35th spot for highest foreclosure rate. It has 1,370,281 housing units, of which 136 went into foreclosure, making the state’s latest foreclosure rate one in every 10,076 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Cleveland, Miller, Fulton, Union, and Lonoke.
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In Mississippi, the 33rd most populated state, there were 132 foreclosures out of 1,322,808 housing units. That put the foreclosure rate at one in every 10,021 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Lawrence, Coahoma, De Soto, Franklin, and Holmes.
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Ranked 25th for population, Louisiana took the 33rd spot, with 219 homes out of a total 2,059,918 going into foreclosure. That means Louisiana had a foreclosure rate of one in every 9,406 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Saint Charles, Franklin, Saint Landry, Tangipahoa, and Livingston.
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The 21st most populated state ranked 32nd for highest foreclosure rate. Of Colorado’s 2,386,475 housing units, 254 went into foreclosure, making for a foreclosure rate of one in every 9,396 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Jackson, Delta, Phillips, Morgan, and Archuleta.
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The 12th most populated state ranked 31st for highest foreclosure rate, with 387 homes going into foreclosure. Having 3,514,032 total housing units, the state saw a foreclosure rate of one in every 9,080 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Norton City, Sussex, Martinsville City, Surry, and Mathews.
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The eighth least populated state took the 30th spot for highest foreclosure rate. A total of 53 homes went into foreclosure out of 468,335 total housing units, making the foreclosure rate for the Ocean State one in every 8,837 households. Only four counties in the state had foreclosures.They were (from highest to lowest): Kent, Providence, Bristol, and Newport.
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With 1,015 out of a total 8,322,722 housing units going into foreclosure, the fourth most populated state took the 29th spot. New York’s foreclosure rate was one in every 8,200 households in February. The counties with the most foreclosures per housing unit were (from highest to lowest): Suffolk, Cattaraugus, Ulster, Washington, and Greene.
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With 343 foreclosures out of 2,694,527 total housing units, Wisconsin, the 20th most populated state, had a foreclosure rate of one in every 7,856 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Langlade, Washburn, Waupaca, Walworth, and Dodge.
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The 15th most populated state ranked 27th for highest foreclosure rate. Of Massachusetts’ 2,897,259 housing units, 374 went into foreclosure, making for a foreclosure rate of one in every 7,747 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Hampden, Bristol, Plymouth, Berkshire, and Worcester.
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Oklahoma claimed the 26th spot. With housing units totaling 1,731,632, the 28th most populated state saw 234 homes go into foreclosure at a rate of one in every 7,400 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Kingfisher, Jackson, Craig, Dewey, and Muskogee.
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The 40th most populated state, Hawaii came in 25th for highest foreclosure rate. Of 542,674 homes, 75 went into foreclosure, making for a foreclosure rate of one in every 7,236 households. Only four counties in the state had foreclosures. They were (from highest to lowest): Hawaii, Honolulu, Kauai, and Maui.
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Ranked 24th for most populated, Alabama came in 24th for highest foreclosure rate. Of its 2,255,026 homes, 321 went into foreclosure, making for a foreclosure rate of one in every 7,025 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Escambia, Henry, Autauga, Russell, and Conecuh.
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The Lone Star State saw 1,588 foreclosures in February. With a foreclosure rate of one in every 6,887 households, this put the second most populous state with 10,937,026 housing units into the 23rd spot. The counties with the most foreclosures per housing unit were (from highest to lowest): Real, Cochran, Atascosa, Mcculloch, and Wilson.
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The 18th most populated state, Missouri came in 22nd for highest rate of foreclosures. Of its 2,790,397 homes, 411 went into foreclosure, making for a foreclosure rate of one in every 6,789 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Shelby, Dekalb, Audrain, Clay, and Perry.
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The 36th most populated state took the 21st spot for highest foreclosure rate. This is the same ranking the state held in January. Of its 937,920 homes, 141 went into foreclosure, making for a foreclosure rate of one in every 6,652 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Sierra, Otero, Valencia, Eddy, and San Juan.
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Pennsylvania, the fifth most populated state, had a total of 876 housing units out of 5,693,314 homes go into foreclosure, making the state’s foreclosure rate one in every 6,499 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Philadelphia, Venango, Bucks, Delaware, and Schuylkill.
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Ranked 37th for population, Nebraska claimed the 19th spot with a foreclosure rate of one in every 6,345 homes. With a total 837,476 housing units, the state had 132 foreclosure filings. The counties with the most foreclosures per housing unit were (from highest to lowest): Hamilton, Garden, Clay, Webster, and Platte.
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The ninth most populated state took 18th place for highest foreclosure rate. Out of 4,627,089 homes, 768 went into foreclosure. That put the Tar Heel State’s foreclosure rate at one in every 6,025 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Jones, Scotland, Gates, Tyrrell, and Onslow.
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With 236 housing units out of 1,397,087 homes going into foreclosure, the 30th most populated state’s foreclosure rate was one in every 5,920 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Tama, Mills, Jasper, Obrien, and Van Buren.
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Utah placed 16th in February for highest foreclosure rate. Of the Beehive State’s 1,087,112 housing units, 184 homes went into foreclosure, making the 31st most-populated state’s foreclosure rate one in every 5,908 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Juab, Tooele, Beaver, Carbon, and Cache.
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In Arizona, the 14th most populated state, there were 516 foreclosures out of 3,003,286 housing units. That put the foreclosure rate at one in every 5,820 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Gila, Pinal, Cochise, Mohave, and Santa Cruz.
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The eighth most populated state, Georgia ranked 14th for highest foreclosure rate. Of its 4,283,477 homes, 762 were foreclosed on. That put the state’s foreclosure rate at one in every 5,621 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Crawford, Terrell, Elbert, Worth, and Pierce.
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Ranked as the ninth least populated state, Maine placed 13th for highest foreclosure rate. This is the same ranking the state held in January. With a total of 742,788 housing units, the Pine Tree State saw 136 foreclosures for a foreclosure rate of one in every 5,462 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Androscoggin, Washington, Aroostook, Penobscot, and Piscataquis.
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With 281 of its 1,516,629 homes going into foreclosure, Connecticut had a foreclosure rate of one in every 5,397 households. In the 29th most populated state, the counties that had the most foreclosures per housing unit were (from highest to lowest): Windham, Tolland, Middlesex, New Haven, and Hartford.
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Ranking 10th for population, Michigan took the 11th spot with a foreclosure rate of one in every 5,363 homes. With a total of 4,596,198 housing units, the state had 857 foreclosure filings. The counties with the most foreclosures per housing unit were (from highest to lowest): Macomb, Genesee, Wayne, Kalkaska, and Shiawassee.
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The most populated state ranked 10th for highest foreclosure rate. Of its 14,175,976 housing units, 2,927 went into foreclosure, making California’s foreclosure rate one in every 4,843 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Alpine, Yuba, Trinity, Shasta, and Lake.
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The third most populated state in the country has a total of 9,448,159 housing units, of which 2,833 went into foreclosure. That’s a foreclosure rate of one in every 3,335 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Baker, Osceola, Polk, Duval, Suwannee.
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The 17th largest state by population, Indiana took the eighth spot with a foreclosure rate of one in every 3,262 homes. Of its 2,886,548 homes, 885 homes were foreclosed on in February. The counties with the most foreclosures per housing unit were (from highest to lowest): Sullivan, Lake, La Porte, Madison, and Vanderburgh.
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The sixth least populated state in the country, Delaware ranked seventh for highest foreclosure rate. This is the same ranking the state held in January. With one in every 3,257 homes going into foreclosure and a total 433,195 housing units, Delaware saw a total of 133 foreclosure filings. With only three counties in the state, the most foreclosures per housing unit were in (from highest to lowest): Kent, New Castle, and Sussex.
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Ranked 19th for most populated state, Maryland took sixth place for highest foreclosure rate. With a total of 2,448,422 housing units, of which 779 housing units went into foreclosure, the state’s foreclosure rate was one in every 3,143 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Caroline, Prince George’s County, Dorchester, Washington, and Baltimore City.
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Ranking 34th in population, Nevada took the fifth spot for foreclosure rate. With one in every 3,112 homes going into foreclosure and a total of 1,250,893 housing units, the state had 402 foreclosure filings. The counties with the most foreclosures per housing unit were (from highest to lowest): Clark, Lander, Mineral, Nye, and Washoe.
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With one in every 3,001 homes going into foreclosure, South Carolina took the fourth spot. Ranked 23rd for population, South Carolina has 2,286,826 housing units and saw 762 foreclosure filings. The counties with the most foreclosures per housing unit were (from highest to lowest): Dorchester, Richland, Lexington, Kershaw, and Orangeburg.
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Ohio claimed the third spot in February, with a foreclosure rate of one in every 2,801 homes. With a total of 5,202,304 housing units, the seventh most populated state had a total of 1,857 filings. The counties with the most foreclosures per housing unit were (from highest to lowest): Cuyahoga, Preble, Lake, Marion, and Trumbull.
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Illinois remained in the top three, taking second place once again. Of its 5,360,315 homes, 2,126 went into foreclosure, making the sixth most populated state’s foreclosure rate one in every 2,521. The counties with the most foreclosures per housing unit were (from highest to lowest): Edgar, Livingston, Will, De Kalb, and Cook.
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With a foreclosure rate of one in every 2,510 homes, New Jersey took the top spot for a second month in a row. The 11th most populated state has 3,616,614 housing units, of which, 1,441 went into foreclosure. The counties with the most foreclosures per housing unit were (from highest to lowest): Salem, Ocean, Burlington, Warren, and Essex.
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Of all 50 states, California had the most foreclosure filings (2,927); South Dakota had the least (5). As for the states with the highest foreclosure rates, New Jersey, Illinois, and Ohio took the top three spots, respectively.
The Great Lakes region and the Mideast region tied for the largest presence among the 10 states that ranked the highest for foreclosure rates. The states in the Great Lakes region were (from highest to lowest): Illinois, Ohio, and Indiana. The states in the Mideast region were (from highest to lowest): New Jersey, Maryland, and Delaware.
The Plains region and the West region tied for the regions with the largest presence among the 10 states that ranked the lowest for foreclosure rates. In the Plains, these states were (from highest to lowest): Kansas, North Dakota, and South Dakota. In the West, these states were (from highest to lowest): Washington, Oregon, and Alaska.
This article originally appeared on SoFi.comand was syndicated by MediaFeed.org.
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