End of Mortgage Relief Could Boost Housing Inventory

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The housing market could soon see a flood of new listings, as vulnerable homeowners sell their homes in order to avoid foreclosure.

Key Takeaways

  • People exiting mortgage forbearance programs in September and October could increase the number of houses for sale by 15% over the next three months, creating 211,700 additional listings, according to a report released Tuesday by real estate company Zillow.
  • More than 1.5 million homeowners are 90 days late or more on their mortgages but not in foreclosure. Homeowners who are behind on their payments can avoid foreclosure by selling their home and using the money to pay off the mortgage.
  • Government relief programs, like a nationwide foreclosure ban and special mortgage forbearance, have either expired or will start to in the coming months, putting more people at risk of losing their homes.


With mortgage borrowers set to lose forbearance protection in September and October, the number of homes for sale could increase by 15% over the next three months, according to a report released Tuesday by real estate company Zillow. That translates to an additional 211,700 listings, the analysis said, or 13.1% of all predicted sales between now and the end of October.

Home prices have soared to record highs as people looking for more space during the pandemic moved away from crowded cities. At the same time, the increased demand depleted the supply of available homes. Now, higher home values have given owners more equity and pushed the share of borrowers who are “under water”—owing more on their home than what that home’s worth—to its lowest level in a decade, a study from the Urban Institute found. Zillow’s report projects that many homeowners who are behind on their mortgage will take advantage of this and decide to avoid foreclosure by selling their home and using the money to pay off the mortgage.

More than 1.5 million homeowners are 90 days or more past due on their mortgages but not in foreclosure, nearly four times pre-pandemic levels, according to a report by analytics company Black Knight. The expiration of several government programs could mean that some of those homeowners could be in danger of losing their homes this fall.

A nationwide foreclosure ban for homes with government-backed mortgages expired July 31, and a separate program that prevents homeowners from being evicted lasts until the end of September. At the same time, pandemic mortgage forbearance—special payment programs where the lender agrees not to foreclose upon a home—lasts only 18 months, meaning that people who enrolled at the outset of the pandemic in March 2020 will run out of time on their plans starting in September. The highest volume of people exiting forbearance will come in September and October, Zillow said.

There were nearly 4.7 million people in active forbearance plans in May 2020, during the brunt of the pandemic-related economic shutdowns. As of July 2021, that number had fallen to about 1.9 million homeowners, or about 3.5% of all borrowers with a mortgage.

The report noted that its projection assumes that borrowers exiting forbearance in the coming months will behave the same way as borrowers who have exited in the past year. About 25% of borrowers may have listed their homes after leaving forbearance, Zillow researchers estimate. In a more pessimistic scenario—if the share of homeowners choosing to sell should jump to 50%—the housing supply would increase 31% relative to June’s levels, accounting for 26% of expected sales in the next three months.

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