The 2026 foreclosure crisis that some people predicted has failed to materialize, and now those people look silly. We should be thankful for the regulations and laws enacted that laid the foundation for such a sound housing credit market: The 2005 bankruptcy reform law and the 2010 Dodd-Frank laws that established qualified mortgage guidelines were historically positive for the U.S. economy.
Looking at the New York Fed’s Household Debt and Credit Report for Q3, we can clearly see that the anticipated foreclosure crisis hasn’t happened. All the headlines showing a high percentage of year-over-year growth in foreclosure data didn’t amount to anything near a crisis.
For those who expected a situation worse than what we experienced in 2008, it has been an embarrassing year. This highlights the dangers of listening to economic discussions from those without the necessary expertise. So let’s talk about where these doomers get it wrong.
The idea that the FHA foreclosure moratorium, which ended in October 2025, would lead to a surge in distressed listings has been a popular topic this year. It’s gotten a lot of headlines, but has fallen flat on its face, since that isn’t how the foreclosure-to-listing process works in America. At minimum, it takes 9-18 months from the start of the foreclosure process to finally add that supply to the marketplace.
And foreclosure data has not, at any point since 2014, shown any material sign of credit stress building up in the pipeline. Always remember, 1%-4% of all mortgages are always going to be in delinquency; it’s when that data breaks above historical norms that it should get everyone’s attention.
To illustrate what a true foreclosure crisis might look like, we can consider the historical context: since World War II, we have experienced 13 recessions with an average unemployment rate of 7.8%, but only one significant foreclosure crisis, which was the run-up to the 2008 Great Recession.
It took four years for the foreclosure credit market to build up before the 2008 recession hit. As we finish Q3 of 2026, we still haven’t returned to pre-COVID levels of foreclosure credit stress, as the data below has always shown for anyone who believes in reading.
The New York Fed foreclosure credit stress data line moves slowly, and unless this index is above 200, there isn’t much activity out of the norm. The many posts this year predicting a foreclosure crisis have proven to be exaggerated. The scale of the situation is small, and it’s clear that many commentators lack the experience to accurately discuss the current market conditions.
Additionally, I want to highlight HousingWire’s new listing data. During the previous housing crisis, credit foreclosures directly impacted new listing data, pushing weekly listings to between 250,000 and 400,000 — for years. These listings represented distressed sellers who were forced to sell in an underwater market. All those increases from 2005-2008 in foreclosures eventually became distressed sales, and none of that is happening today.
Let’s compare the new listings data for last week to the same week from 2009-2011:
- 2009: 280,400 new listings
- 2010: 353,457 new listings
- 2011: 352,030 new listings
- 2026: 54,478 new listings
We’re missing a credit boom/bust
The 2008 massive credit boom and bust took many years to create. We have not seen this kind of credit boom in housing from 2010-2026, so it’s impossible to have a credit bust like 2008 — or “worse than 2008,” as many untrained fake housing analysts have talked about for years. A lot of people can’t let go of the past, as they’re still dancing with the ghost of the 2008 housing crisis. They should relax, have a glass of wine, and reflect on their bad takes.
In contrast, over the last 16 years, FICO scores in America have remained strong. Most homeowners have 30-year fixed-rate mortgages, and qualification guidelines are much more stringent and effective now. Rising wages and homeowners staying in their properties longer have contributed to the overall financial health of American households.
Despite claims of an impending foreclosure crisis, the reality is quite different. In 2010, over 23% of homes in America were underwater, with loan-to-value ratios reaching nearly 86% in 2011. Currently, the loan-to-value figure is down to 44.2%, as the chart below shows.
It’s crucial to be cautious about who you listen to, as the narrative of a looming crisis has been overstated for many years. If someone tells you it’s housing 2008 or a foreclosure crisis is here, tell them to read a book instead of burning it, and read HousingWire.
