Foreclosures Reach 7-Year Peak Amid Affordability Crisis

The national foreclosure rate has reached its highest point in nearly seven years, driven by the ongoing affordability crisis. This trend presents opportunities for buyers and investors seeking properties below market value, though navigating the complexities of foreclosed homes, known as Real Estate Owned (REO) properties, is crucial. REO properties are listed by banks after failing to sell at auction, typically sold "as is" without repairs.

During the COVID-19 pandemic, foreclosure rates significantly decreased due to federal relief measures like the CARES Act's foreclosure moratorium and mortgage forbearance programs. Even after these programs ended, foreclosure rates remained low for several years, supported by substantial home equity gains and extended forbearance programs from Fannie Mae and Freddie Mac, which concluded in 2024. These programs provided homeowners with payment deferral, loan modifications, and forbearance options.

Since the conclusion of these extended relief programs, foreclosure rates have steadily increased. This rise is attributed to a combination of factors including elevated home prices, escalating property taxes, increasing insurance premiums, and the cost of living outpacing wage growth. These economic pressures are making it increasingly difficult for homeowners to maintain their monthly mortgage payments.

As of the beginning of 2026, the national foreclosure start rate was reported at 0.24%. This figure aligns with the benchmark rate observed in 2019, according to data from the Mortgage Bankers Association. The report from Realtor.com® highlights that smaller markets, predominantly located in the South and Midwest regions of the U.S., are now accounting for the largest share of default listings.