Foreclosures trending up but well below crisis levels
More than 185,000 properties had foreclosure activity in the first half of 2023, up 13% from last year.
- Foreclosures are still far below pre-pandemic levels.
- A strong jobs market and high levels of homeowner equity should stave off a foreclosure crisis.
- Illinois, New Jersey and Maryland had the highest overall foreclosure rates in the first half of 2023.
The foreclosure crisis that followed the 2008 financial collapse isn't likely to repeat itself anytime soon — distressed properties remain below pre-pandemic levels, and many homeowners are equity-rich. But with the economic turbulence of the past year and continued efforts by the Fed to tame inflation, foreclosure levels are trending up.
Americans had 185,580 foreclosure filings in the first half of 2023, according to the latest report from ATTOM, which tracks property data. Filings include pre-foreclosures, auctions and bank-owned homes. That's up 13% from the first half of 2022, but well below similar pre-pandemic time periods — nearly 300,000 filings were reported in the first half of 2019.
And that pales in comparison with the peak period in 2010, when more than 1.65 million homes were in foreclosure in the first half of the year.
Although levels remain below historical norms, the 13% jump in filings this year — and a 15% increase in foreclosure starts — could be a sign that levels will continue to rise over the next few years, said Rob Barber, CEO of ATTOM.
A strong jobs market has kept distressed property levels low up to this point. While that could change if the economy continues to slow and unemployment goes up, high levels of homeowner equity should have a counterbalancing effect, preventing a tsunami of foreclosures even if job losses rise.
Some states have been harder hit
While overall levels remain relatively low across the U.S., foreclosures doubled — or came close — in a handful of states. The biggest jumps in foreclosure activity were in Maryland (up 100%); Oregon (up 99%); and Alaska (up 95%). Illinois, New Jersey and Maryland had the highest overall foreclosure rates.
At the metro level, Cleveland, Ohio; Atlantic City, New Jersey; and Fayetteville, North Carolina had the highest foreclosure rates.
In a recent On The Market podcast, Daren Blomquist of Auction.com noted that there's a big variance across the country. In Colorado and Iowa, foreclosure activity was above pre-pandemic levels, while Arizona, Washington state and Florida saw a sharp decline. Foreclosure levels in those states were around one quarter of what they were prior to the pandemic.
Blomquist sees the rise in foreclosures this year as a return to more normal levels of distressed property after a decline created by pandemic-era moratoriums. Those most vulnerable are buyers who bought around the peak of the market in early 2022.
Homes averaging more than 3 years in foreclosure
The amount of time a distressed property spends in the foreclosure process has jumped significantly, rising 28% quarter-over-quarter and year-over-year. In the second quarter, foreclosed properties had spent an average of 1,212 days in the foreclosure process. That's more than three years, and an all-time high, according to the report.
Michigan had the longest average foreclosure timeline in the second quarter at 2,601 days, or more than seven years, on average. Wyoming had the shortest timeline at 104 days.