Are We Headed for a Foreclosure Wave, or a Housing Crash?
Short answer: almost certainly not, at least by the measures that caused the last crash. Yes, foreclosure activity has ticked up and some prices have softened, but a true wave needs two things at once that simply are not lining up today. Here is the calm, honest picture for East Valley homeowners.
Here is the direct answer: the fear of a repeat of the last housing crash is understandable, but the conditions that would create a true foreclosure wave are not in place today. It is true that foreclosure activity has risen and that some home prices have softened, and headlines love to pair those two facts with memories of the past downturn. But housing economists point out that a real wave requires two triggers to hit at the same time, and right now those triggers are far apart. If you are an East Valley homeowner worried about where things are heading, the honest picture is far more reassuring than the noise. Here is why.
What would it actually take to cause a foreclosure wave?
This is the framework worth understanding, because it cuts through the fear. As one housing economist put it, a foreclosure wave needs two things to happen together.
Today, those two triggers remain far apart.
Why both triggers are contained right now
The reason the wave has not formed is that each trigger is being held back by a genuine strength in the current market.
A foreclosure wave usually starts with widespread job loss, and that simply has not happened. With employment holding up, the great majority of homeowners are still able to make their payments, which keeps the first trigger from firing.
This is the big one. After years of rising values, homeowners as a group hold a tremendous amount of equity. That means even someone who hits hardship can usually sell the home rather than lose it to foreclosure, which defuses the second trigger.
So why are foreclosures rising at all?
Mostly because they are returning to normal. During the pandemic, foreclosure activity was pushed to artificially low levels by temporary protections. As those wound down, activity naturally climbed back toward typical levels. Experts broadly describe the current trend as normalization, not the start of a crisis, and some newer loans understandably show a bit more stress than seasoned ones. Softening prices, meanwhile, can actually help affordability, a price dip is not the same thing as a crash.
Why East Valley homeowners are especially well-positioned
Locally, the picture is even more reassuring. Homeowners across Gilbert, Chandler, Mesa, and Queen Creek have built substantial equity through years of steady growth, which is exactly the cushion that keeps the second trigger from firing. That does not mean any individual situation is guaranteed, markets are always local and personal, but as a group, East Valley owners sit on a strong foundation. If you want to understand your own equity position, our guide on what being underwater really means is a good companion.
What if I'm the one who hits hardship?
National calm is reassuring, but your situation is personal, so here is the practical part. If you do fall into difficulty, that same equity is your greatest ally, and options exist well before foreclosure.
If you had to, selling while you hold equity is far better than being foreclosed on. Knowing your real equity position is the first step, and it is something we can help you understand.
Between doing nothing and losing a home lies a whole set of choices. We lay them out in our guides on short sale versus foreclosure options and, for veterans, what to do when you are behind on a VA loan.
If you are a veteran homeowner, the same reassurance applies, and then some. Steady employment and the equity you have built put you on solid ground, and your VA benefit brings added protections if life throws a curve. Do not let the doom headlines rattle you. If you ever want a straight read on where you stand, my door is open.
To keep the lanes clear: nobody can predict the market with certainty, and this is context, not a forecast. What your specific home is worth is your real estate agent’s expertise. My lane is helping you understand your real equity and payoff picture, and mapping your options early if you ever face hardship, so you can replace anxiety with facts. Reach out any time through our East Valley mortgage team.
The bottom line
Rising foreclosure numbers and softening prices make for scary headlines, but a true foreclosure wave needs owners who cannot pay and who also cannot sell, and today steady employment and historically high equity keep those two triggers far apart. The recent rise is mostly a return to normal, not a crisis, and East Valley homeowners are especially well-cushioned. If you ever want to understand your own position, or you hit a rough patch and want to know your options, reach out to our East Valley mortgage team, right here across the East Valley.
Are we headed for a housing crash or foreclosure wave?
Most housing economists consider a true foreclosure wave unlikely right now. A wave requires owners who cannot pay and who also lack the equity to sell, and today steady employment and historically high homeowner equity keep those two conditions far apart, unlike the last crash.
Why are foreclosures rising if there's no crisis?
Largely because they are normalizing. Pandemic-era protections pushed foreclosure activity to artificially low levels, and as those wound down, activity climbed back toward typical levels. Experts broadly describe the current trend as a return to normal rather than the start of a crisis.
Does softening home prices mean a crash is coming?
Not necessarily. A price dip is not the same as a crash, and softer prices can even improve affordability for buyers. What made the last downturn severe was owners who could not pay being unable to sell, which is not the widespread situation today.
Why does homeowner equity prevent a foreclosure wave?
Because equity gives a struggling owner a way out. If someone hits hardship but holds meaningful equity, they can usually sell the home rather than lose it to foreclosure. Widespread high equity today defuses the second trigger a foreclosure wave would need.
What should I do if I'm personally struggling to pay my mortgage?
Act early, because options exist well before foreclosure, and your equity is a major asset. Understand your real equity and payoff position, and explore alternatives like a sale, or for veterans, VA hardship options. Reaching out early keeps the most choices open.
This article is for general educational purposes and is not financial advice or a commitment to lend. It does not predict future home prices, foreclosure activity, or market conditions, which are uncertain and vary by area and individual circumstance. General observations about housing conditions and statements attributed to a housing economist reflect a published article and third-party data, are paraphrased and generalized for context, and those parties are not affiliated with and do not endorse CrossCountry Mortgage or the author. Home values and equity should be assessed with a licensed real estate agent or appraiser, and any decision about a struggling mortgage should involve your servicer and, where appropriate, a HUD-approved housing counselor or attorney. Loan approval depends on credit, income, and assets, and getting pre-approved does not guarantee loan approval. VA loan eligibility and benefits depend on individual circumstances. CrossCountry Mortgage is a private lender and is not acting on behalf of, or at the direction of, the U.S. Department of Veterans Affairs. Equal Housing Opportunity.
