Nearly 230,000 homes across the country are in the process of foreclosure, up 31 percent from the first quarter of 2021 and up 3 percent from last quarter, according to a report by property database Attom.
Of those, a small fraction, just over 7,000, are zombie properties, meaning they are also abandoned. That number might rise slightly as lenders pursue the 1.5 million to 2 million homeowners who were in forbearance when the moratorium ended, but thanks to rising home prices, experts say the increase won’t be significant, at least for now.
“The problem of empty properties in foreclosure and the blight they can cause still remains off the table almost everywhere in the country,” said Todd Teta, chief product officer at Attom. “But the rosy picture is again in danger.”
The consolation for homeowners struggling to make payments is that their property values have risen, leaving few underwater on their mortgages. Low interest rates and tight supply have pushed up home prices in much of the country by more than 10 percent over the past year. That should keep homeowners from walking away from their properties, according to Rick Sharga, executive vice president of RealtyTrac, an Attom company.
“Zombie status is most likely during a long, protracted foreclosure process, but with $23 trillion in homeowner equity, and demand outstripping supply, most distressed borrowers should be able to sell their home at a profit before the process drags on,” Sharga said.
States in the Northeast and the Midwest have the highest counts of zombie properties.
“If we do see a jump in the number of zombie properties, it will likely happen in states like New York, Illinois, and Florida,” Sharga noted. “Judicial foreclosures in these states often get delayed by court backlogs, and the foreclosure process has sometimes dragged on for over 1,000 days.”