People love to generalize the way that markets behave because it makes investing seem less risky. Still, there are never any guarantees about what will happen with any given investment. For example, there have long been claims that real estate prices always trend upward.
However, one need only think back to the 2008 real estate market to realize that that is not always the truth. People who buy when prices are high may not ever reach a point where their property is worth more than what they paid for it. Those who are upside down or underwater on their mortgages are far more likely to face foreclosure, possibly because they no longer see the point in making payments.
Is the housing market correction that some experts say is on the horizon about to lead to a surge in foreclosures?
Some people may be underwater on their mortgages already
The markets in many areas have already started to cool down following the surge in buying in recent years. Prices have dropped to better reflect the amount of demand. With high prices and higher interest rates, soft markets are likely to continue in many metropolitan areas.
As homes start selling for lower prices in the same neighborhood, some property owners will eventually realize that they are probably underwater on their mortgages. A few of them may eventually fall behind and face foreclosure. The rate of foreclosure will likely be lower than in 2008, as lenders now have more cautious standards about lending.
Loan modifications can help those struggling to make payments
Foreclosing on a home is an expensive process, and mortgage lenders can lose money when they have to foreclose, especially if the property is now worth less than the amount that the lender initially financed. A lender may be more cooperative and supportive when the company stands to lose money when reselling the property.
Of course, negotiating a loan modification as a way to prevent foreclosure is a complex and stressful process. You may require help to successfully change the terms of your loan and protect your property from foreclosure. Tracking the real estate market and considering the impact changing prices may have on your property can help you better protect the investment you have made through a loan modification.