As I discussed last week, the impact of mortgage forbearance and foreclosures on the residential market remains unknown. There are multiple variables that could impact the ultimate effect: government intervention, the outcome of the COVID-19 pandemic, and the state of the economy and job growth when foreclosures are once again allowed.

The Biden administration bought more time for job growth and to bring an end to the economic impact of the COVID-19 pandemic this week by extending the foreclosure moratorium, which was set to expire on March 31. The moratorium now lasts until (at least) June 30. This gives the economy another three (3) months to recover. From an optimistic viewpoint, this could blunt the impact of foreclosures, as more borrowers could get back on firm financial footing during this three-month period. A pessimist might argue that this only kicks the can down the road another three months.

Regardless of your viewpoint, this extension does delay the potential impact of foreclosures on the residential market. As has been noted in several articles, residential prices are growing at a brisk pace. A glut of foreclosures could slow down that price growth. However, given the timing to process a foreclosure, the redemption period, and the post-possession sale process, it does not appear that foreclosed properties will hit the market until late in Q3 2022, or early Q4 2022, given this new extension of the foreclosure moratorium.

The residential market in Michigan remains strongly favorable to sellers. Inventory is limited, and demand remains strong. Perhaps in 2022 the entry of foreclosed properties to the marketplace will shift the pendulum back in the buyer’s direction.