Zombie Foreclosures on the Rise but Poses Little Threat to Housing Stability
The U.S. housing market, having experienced significant turmoil in the past, now faces another concerning trend – the rise in vacant homes under foreclosure. But, how concerning is this uptick? Let’s delve into the recent findings from ATTOM, a leading real estate data curator.
Zombie Foreclosures: A Closer Look
1.3 million residential properties in the U.S. currently stand vacant, representing 1.3% of homes nationwide. Of these, 315,425 properties are undergoing the foreclosure process, a 16.6% increase from the third quarter of 2022. Notably, among these properties, about 8,800 are classified as “zombie foreclosures,” homes abandoned by owners amidst a foreclosure procedure.
It’s imperative to understand the backdrop of these figures. After the nationwide moratorium on lenders pursuing delinquent homeowners – imposed due to the Coronavirus pandemic – was lifted in 2021, a rising number of homeowners have faced foreclosure.
Yet, the statistics are not as dire as they might initially seem. While the latest figures represent the sixth consecutive quarterly increase in zombie foreclosures, the rise is modest. These abandoned homes constitute just a minuscule segment of the nation’s total 101.6 million residential properties.
Rob Barber, CEO for ATTOM, explained, “The increment in zombie foreclosures is minor and aligns with the slight uptick in nationwide foreclosure activity. Unlike the aftermath of the Great Recession in the late 2000s, these abandoned properties do not pose the same level of threat.”
Housing Boom and Foreclosure Dynamics
Interestingly, the minimal impact of zombie foreclosures can be attributed to the U.S. housing market boom since 2012. This boom has doubled the national median home value, resuming its trajectory in recent quarters after a brief hiatus in 2022.
Higher home equity and profitable selling avenues have incentivized homeowners to avoid foreclosure. However, regions with financially constrained households, such as New York City and Miami, still see a higher proportion of zombie homes. Should the housing market decline, these areas could be more susceptible to zombie foreclosure issues.
State-Specific Insights and Overall Vacancy Rates
Although zombie foreclosures increased in 19 states quarterly, a few states saw significant increases. These include Missouri (51% rise), Maryland (22%), Oklahoma (15%), Connecticut (13%), and Pennsylvania (11%). In contrast, states like Texas and Michigan experienced reductions in zombie properties.
The overall vacancy rate for U.S. homes has remained relatively stable at around 1.26-1.28% over the past five quarters. States with the highest vacancy rates include Oklahoma, Kansas, and Alabama, while New Jersey, New Hampshire, and Vermont have the lowest.
Regional Differences and Investor-Owned Properties
Among metro areas, regions such as Cedar Rapids, IA, Peoria, IL, and Indianapolis, IN have high zombie foreclosure rates. For investor-owned homes (totaling 23.4 million in the U.S.), 3.6% are vacant. Indiana, Oklahoma, and Alabama lead in terms of vacant investor-owned properties.
Of the bank-owned foreclosed homes, 15.8% stand vacant. In this segment, states like Kansas, Iowa, Ohio, Michigan, and Indiana have the most considerable vacancy rates.
Final Thoughts
While the rise in zombie foreclosures is undeniable, the broader context is essential. In comparison to the U.S.’s housing landscape after the 2008 recession, today’s market is more robust and resilient. However, it’s crucial to keep an eye on regional variances and monitor vulnerable areas for potential challenges.
Continued vigilance, policy initiatives, and homeowner support can ensure that the ghost of zombie foreclosures doesn’t haunt the nation’s housing market.