How Foreclosures Impacts On The Housing Market

      Comments Off on How Foreclosures Impacts On The Housing Market

For every house owner, who is way behind paying their mortgages, foreclosure is like a nightmare for them. While the practice of foreclosure is gradually receding, there are still some states left, where foreclosure is still being subjected to practice. The causes behind the decline of foreclosure are none other than new acts and laws issued by the government to put restraints on these activities. 

While foreclosures are bad news for homeowners, at the same time, they can be beneficial for personnel involved in the housing market along with the market itself. At the same time, it can also have an adverse effect on the market as well. Since it is a component that plays a vital role in the housing market, it has the potential to both benefit and affect the housing market. 

This article will discuss the Positive and negative impacts of foreclosure in the housing market. So, if you are interested to know how it can help you or can help the housing market, keep reading this article.

But, before landing on that, let’s see what a foreclosure is and why it is initiated. 

What Is Foreclosure? 

A foreclosure occurs, when a certain homeowner fails or stops paying the loan that he had acquired from a lender or a bank, to purchase the house in the first place. The duration of the failure to repay the loan may vary according to the terms and conditions of the bank when the loan was first granted. 

In simple words, when a house is deemed to be in foreclosure, the ownership of the house gets transferred from the homeowners to the bank or lender who provided the loan in the past. 

Why Does A Foreclosure Happen?

As mentioned earlier, a foreclosure happens when a homeowner is unable to pay his loans, for a certain amount of time. The causes of this inability can be varied by different persons. However, here are a few most common causes are listed below, 

  • Loss of employment
  • Divorce or separation
  • Expensive medical bills

Overall, any financial dip can result in the foreclosure of properties. 

How Does Foreclosure Impacts the Housing Market? 

  • Positive Impacts of Foreclosure

Investors: Foreclosures are highly beneficial for investors, who are looking to purchase houses at a minimal price. Foreclosure allows them to obtain houses, remodel them, and then opt out of the real estate, with anticipation of acquiring higher revenue. 

Buyers: Likewise, it also helps buyers who are looking to buy houses at a minimal cost. They can modify it according to the convenience and start living in it. 

  • Negative Impacts of Foreclosure

Sellers and Homeowners: As mentioned earlier, Foreclosure eventually reduces the actual market value of the house. Which eventually causes a loss on the realtor’s side or sellers. It also highly affects the homeowners as sometimes they have no alternative solution other than eviction. 

How Does It Impact The Overall Housing Market? 

While foreclosures can help the housing market by providing an even price on the houses in a certain area, it can also reduce the market value of the houses which eventually reduces the overall market value. However, foreclosure can also help the housing market to create rules and regulations that are highly convenient for the homeowners as well as those involved in real estate businesses. 


The impacts made by foreclosure are more neutral, it impacts both positively as well as negatively. However, to learn more about how it can help the housing market, do consider visiting the property press.