A row of new suburban houses.

Foreclosure filings and debt are rising, but no need to panic yet 

Overall filings remain low but economic stress in the form of increasing credit card debt and depleted savings could push them higher.

October 16, 2023
3 minutes

Key points:

  • The latest ATTOM report found foreclosure filings are up 34% compared to a year ago.
  • While up, filings remain at low levels compared to the previous 13 years, aided by a strong jobs market.
  • New Jersey, South Carolina and Delaware had the highest foreclosure rates in the third quarter.

Foreclosure activity has continued to climb back to levels last seen before the pandemic hit, but it is still one of the lower-level problems in this challenging market.

In its third quarter report, ATTOM found that just over 124,000 total foreclosure filings were submitted in the third quarter, up 28% compared to last spring and up 34% from a year ago. The filings include default notices, scheduled auctions and bank repossessions.

These numbers are approaching levels last seen in 2019, but that was still a time of relatively low levels of distressed property and just a fraction of what Americans were dealing with during the fallout of the Great Recession in 2010, when filings were totaling more than 900,000 a quarter.

One aspect of the filings — new foreclosures — were up 3% year-over-year but actually down 1% from the previous quarter, suggesting that the upward trend might be easing, said Rob Barber, CEO at ATTOM.

A strong jobs market is helping keep foreclosures in check. Barber noted that there's a clear correlation between maintaining employment and making mortgage payments. When the national unemployment rate climbed to10% around 2010, lender actions against delinquent homeowners soared. The more recent spike in unemployment at the beginning of the pandemic was an exception due to the foreclosure moratorium and options for borrowers to temporarily suspend mortgage payments. 

Compared to employment levels, elevated interest rates have less of an impact on foreclosures, but they can make things more difficult. 

"When rates go up, it can make it harder for homeowners who are far behind on their mortgages to refinance their loans to avoid foreclosure," Barber said.

Debt is rising, which puts pressure on homeowners and would-be buyers 

Keeping distressed property levels low could become more challenging as more Americans with mortgages deal with economic stress. 

According to data compiled by First American Financial Corporation, consumers have nearly depleted the excess savings from the pandemic while also accumulating more credit card debt and resuming student loan repayments. That will dampen their ability to spend, said Xander Snyder, a real estate economist for the firm. For those with a mortgage, it also leaves them more vulnerable to missing mortgage payments if a financial emergency or job loss takes place.

Credit card debt is becoming significant. A recent survey done by Clever Real Estate found that 61% of Americans are in credit card debt at a time when interest rates continue to increase. The average credit card debt was $5,875, according to the survey.

There are still plenty of reasons why distressed properties won't spike, particularly in the short term. While currently increasing, inventory remains very low compared to recent years, which should keep prices stable. Homeowners with a mortgage also have very high levels of equity, resulting in few homes that are underwater, or worth less than the loan.

Where foreclosure rates are highest

The ATTOM report found that New Jersey, South Carolina and Delaware had the highest foreclosure rates in the third quarter. While 1 of every 1,121 households received some type of foreclosure filing across the U.S., New Jersey's rate was 1 in 595.

Among the biggest metro areas, Houston had the highest foreclosure rate for the quarter, followed by Atlantic City and Cleveland.

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