Texas Foreclosures After Forbearance Ends: What to Expect
Todd Teta
HOUSTON – (By Dale King, Realty News Report) – The COVID-19 pandemic has rapidly brought isolation, business closures, travel restrictions, restaurant shutdowns and widespread anxiety to Texans. Along with those disruptions, many homeowners and renters naturally worry about losing their homes.
However, a recent analysis from ATTOM Data Solutions, a property-data firm based in Irvine, California, suggests that widespread foreclosures driven by the coronavirus may not become a major crisis across Texas.
The ATTOM study evaluated 483 counties nationwide to determine vulnerability to virus-related foreclosures. It found the highest concentration of at-risk counties in the Northeast, with clusters in New Jersey and Florida, while the West and Midwest showed fewer high-risk counties.
Texas fared comparatively well: it has 10 of the 50 least vulnerable counties among the 483 analyzed — the most of any state. Wisconsin followed with seven, and Colorado with five.
Among the 10 Texas counties identified as less likely to experience the worst effects are three in the Dallas–Fort Worth metro area: Dallas, Collin and Tarrant counties.
Across the full list of 18 of the 50 least at-risk counties, the top-ranked areas include Harris County (Houston), Dallas County, King County (Seattle), Tarrant County (Fort Worth) and Santa Clara County (San Jose).
Still, the projection is based on current data and assumptions, and the situation remains uncertain given how quickly the pandemic and its economic effects can change.
“It’s too early to tell how much effect the Coronavirus fallout will have on different housing markets around the country. But the impact is likely to be significant from region to region and county to county,” said Todd Teta, chief product officer at ATTOM Data Solutions.
“What we’ve done is spotlight areas that appear to be more or less at risk based on several important factors. From that analysis, it looks like the Northeast is more at risk than other areas. As we head into the spring home-buying season, the next few months will reveal how severe the impact will be.”
ATTOM’s risk ranking combines three measures: the percentage of housing units receiving a foreclosure notice in Q4 2019, the percentage of homes underwater (loan-to-value 100% or greater) in Q4 2019, and the share of local wages required to cover major homeownership expenses.
Counties with sufficient data (483 in total) were ranked in each category from lowest to highest risk, and the final vulnerability ranking is the aggregate of those three category ranks.
Complicating the picture for Texas is the simultaneous collapse in oil prices. Crude briefly fell below $19 a barrel and hovered around $25 per barrel in April, and energy-sector cutbacks could filter through local economies and the housing market, increasing foreclosure risk in some areas.
In ATTOM’s report, Harris County ranks 479 out of 483 counties examined, indicating a higher likelihood of foreclosures relative to other counties. In Q4 2019, 914 properties in Harris County began foreclosure proceedings, equal to 0.05% of housing units.
Other counties around Houston reported similar numbers in Q4 2019: Montgomery County recorded 191 foreclosure starts (0.09%), Fort Bend County had 204 (0.09%), and Galveston County reported 121 (0.09%).
The ATTOM analysis also noted that 36 of the top 50 counties most vulnerable to the coronavirus have median home prices between $160,000 and $300,000. Counties with median home prices below $160,000 or above $300,000 account for the remaining 14 of the top 50.
Markets with median prices below $160,000 tend to be among the most affordable for local wage earners, while counties with medians above $300,000 often include homes with higher equity and historically lower foreclosure rates.
As a partial mitigating factor, several banks have announced temporary suspensions of foreclosures and evictions during the pandemic, a move that can provide short-term relief for homeowners and renters. Some institutions specified suspension periods of 30 to 90 days, while others have not disclosed exact timeframes.
For renters, property owners and managers are offering options such as rent discounts, payment extensions, flexible due-date arrangements and, in some cases, converting security deposits to cover rent during the emergency.
Ironically, the potential surge in foreclosure activity triggered by COVID-19 arrives after February 2020 produced the lowest foreclosure levels on record since the industry began tracking these statistics in 2005.
“Foreclosure activity across the United States hit new lows in February, yet another marker of the nation’s long housing boom,” Teta said in ATTOM’s February foreclosure report. “However, as with just about anything connected to the housing market, the foreclosure situation is now totally in flux because of the ever-evolving Coronavirus pandemic.”
Teta added that many lenders have already suspended foreclosure proceedings, which may keep foreclosure numbers low in the near term. But he warned that an eventual increase in foreclosures is possible if the economic fallout results in significant job losses and widespread mortgage defaults.
