Foreclosure activity in the US is slowly creeping back up to pre-COVID levels. While many federal and state pandemic guidelines temporarily stalled foreclosures and evictions during the pandemic, we have seen a return of foreclosure starts. For the first half of 2022, New Jersey had the second-highest rate of foreclosures in the US, only behind Illinois. Foreclosure filings in NJ increased 245% in the first half of the year, with 9,177 housing units entering into foreclosure between January and June. Here are some factors that could influence NJ's foreclosure rate as we finish 2022 and head into the new year.
1. Nationwide Inflation
The US is experiencing the worst inflation since 1981. The Federal Reserve is working diligently to lower inflation, which may come at the cost of jobs. For the average homeowner, this means spending more on essential goods while dealing with rising interest rates. Inflation could make it increasingly difficult for homeowners to keep up with their mortgages, leading to an uptick in the number of foreclosures we will see.
2. Housing Market Vulnerability
New Jersey is one of the highest cost-of-living states, which can make housing and basic needs unaffordable even in ideal conditions. Many housing markets in NJ are showing a significant risk of decline compared to other housing markets across the country. If the economy declines into a recession, the most vulnerable NJ markets will be the suburbs surrounding New York City and Philadelphia. These communities could see a substantial increase in foreclosure activity.
While NJ currently ranks 15th in the nation for unemployment, the state's unemployment rate has dropped since early in the pandemic. Unemployment rates could change, however, as the Federal Reserve aggressively works to cut down inflation. Even if the unemployment rate in New Jersey does not change drastically, experts suggest this statistic gives an inadequate picture of NJ residents' financial status. Due to the state's high cost of living, some New Jersey residents struggle to stay afloat financially, even while employed.
With a 50/50 chance of entering into a recession within the next two years, NJ homeowners should work to protect their homes from the possibility of foreclosure in 2023 and after. A mortgage modification can make your housing payment more affordable and add a little cushion to your budget. It is also the perfect time to revisit your budget to determine where you can make some changes. Starting an emergency fund, or bulking up the one you already have, can also buy you time in the future if you should lose your income.
If you are worried about the possibility of foreclosure, Veitengruber Law can help. We have years of experience helping New Jersey families stay in their homes. Reach out for a free consultation today.