Steady Housing Market Expected as Foreclosure Protections Expire

Zillow asked more than 100 real estate experts and economists nationwide for their thoughts on expected home price appreciation over the next five years, inventory, and the state of the market once key pandemic-era housing protections end as part of its third quarter Price Expectations Survey. Few experts polled anticipate foreclosed homes will be significantly adding to housing stock. Rather the largest single source of inventory, almost 40%, will come from existing homeowners selling and moving into a different residence.

The panel expects home foreclosures to make up the smallest source of available inventory, at 5.4%.

Additional supply is expected to come onto the market over the next few months as homeowners exit forbearance and some sell their homes, according to previous Zillow research. The federal foreclosure moratorium ended on July 31, and roughly 850,000 borrowers are expected to exit forbearance programs before November 2021. 

However, strong price appreciation over the past few years and very few loans with negative equity mean open market sales are a realistic option for the majority of distressed borrowers. That’s unlike in 2008, when financial conditions and a souring housing market pushed many homeowners into involuntary foreclosure.

New construction is forecast to be the second-largest source of inventory, at 22.5%. New home construction has been weighed down in 2021 due to shortages of key building materials, but even despite the setbacks has largely remained above pre-pandemic levels.

Existing homeowners intent on renting, or not buying again, should contribute 9.6% of supply, according to the panel.

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