Why a Foreclosure Wave Isn’t on the Horizon in Los Angeles and Beverly Hills, CA
Why a Foreclosure Wave Isn’t on the Horizon in Los Angeles and Beverly Hills, CA | Christophe Choo at Coldwell Banker Global Luxury is Your Local Real Estate Expert
Even though data shows inflation is cooling, many people in Los Angeles and Beverly Hills are still feeling the pinch on their wallets. High costs on everything from gas to groceries are fueling unnecessary concerns that more people will have trouble making their mortgage payments. But does that mean there’s a big wave of foreclosures coming to our beloved neighborhoods? Here’s why the data and experts say that’s not going to happen.
There Aren’t Many Homeowners Who Are Seriously Behind on Their Mortgages
One of the main reasons there were so many foreclosures during the last housing crash was because relaxed lending standards made it easy for people to take out mortgages, even when they couldn’t show they’d be able to pay them back. At that time, lenders weren’t being as strict when looking at applicant credit scores, income levels, employment status, and debt-to-income ratio. But since then, lending standards have gotten a whole lot tighter.
Lenders became much more diligent when assessing applicants for home loans, ensuring that buyers are more qualified and have a lower risk of defaulting on their loans. This has been particularly true in high-value areas like Los Angeles and Beverly Hills, where financial scrutiny is even more rigorous. Data from Freddie Mac and Fannie Mae shows that the number of homeowners who are seriously behind on their mortgage payments (known in the industry as delinquencies) has been declining for quite some time. This means that borrowers are not only more qualified but also finding ways to navigate through their financial challenges. They are exploring repayment options or even using the record amount of equity they have to sell and avoid foreclosure entirely.
The Answer Is: There’s No Sign of a Wave Coming
Before there can be a significant rise in foreclosures, the number of people who can’t make their mortgage payments would need to rise significantly. However, in high-demand areas like Beverly Hills and Los Angeles, many buyers are making their payments on time, and homeowners have substantial equity built up. This makes a wave of foreclosures highly unlikely.
Take it from Bill McBride of Calculated Risk – an expert on the housing market who, after closely following the data and market leading up to the crash, saw the foreclosure crisis coming in 2008. McBride says: “We will NOT see a surge in foreclosures that would significantly impact house prices (as happened following the housing bubble) for two key reasons: 1) mortgage lending has been solid, and 2) most homeowners have substantial equity in their homes.”
Bottom Line
If you’re worried about a potential foreclosure crisis in Los Angeles or Beverly Hills, rest assured that there’s nothing in the data to suggest that’ll happen. Buyers are more qualified now, and that’s one reason why they’re not falling seriously behind on their mortgage payments. The tight lending standards and the substantial equity homeowners have built up are keeping the market stable. So, if you're looking to buy or sell in these prestigious neighborhoods, now is a great time to connect with a local real estate expert to help guide you through the process.
Call Christophe Choo at (310) 777-6342 to tour your future home "HERE" or click "HERE" to estimate your home value
