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Vacant Homes in Foreclosure Record Third Consecutive Quarterly Increase

Monday, October 31, 2022   /   by Dave Magua

Vacant Homes in Foreclosure Record Third Consecutive Quarterly Increase

ATTOM has released its fourth-quarter 2022 Vacant Property and Zombie Foreclosure Report showing that 1.3 million—an estimated 1,264,241— residential properties in the United States sit vacant. That figure represents 1.26%—or one in 79 homes—across the nation.

The report also reveals that 284,423 residential properties in the U.S. are in the process of foreclosure in Q4 of this year, up 5.2% from Q3 of 2022, and up 27.4% from Q4 of 2021. A growing number of homeowners have faced potential foreclosure since a nationwide government moratorium on lenders pursuing delinquent homeowners, imposed after the Coronavirus pandemic hit in 2020, was lifted at the end of July 2021.

Among those pre-foreclosure properties, 7,722 are zombie foreclosures—pre-foreclosure properties abandoned by owners—in Q4 of 2022, up 0.2% from the prior quarter, and 3.9% from a year ago. The count of zombie properties has grown in each of the last three quarters.

“The government’s foreclosure moratorium dramatically reduced the number of properties in foreclosure,” said Rick Sharga, Executive VP of Market Intelligence at ATTOM. “Vacant and abandoned properties were among the few homes that could still be foreclosed on during the moratorium, so the number of zombie properties shrank as well. Now that the foreclosure ban has been lifted, we’re likely to see a gradual return to pre-pandemic levels.”

Despite the increase, the number of zombie-foreclosures remains historically low, representing just a tiny segment of the nation’s total stock of 100.1 million residential properties. Just one of every 12,963 homes in Q4 of 2022 is vacant and in foreclosure, meaning that most neighborhoods still have no such properties. That ratio is almost exactly the same as in Q3 of this year, although up 2.5% from one in 13,292 in Q4 of 2021.

The portion of pre-foreclosure properties that have been abandoned into zombie status, meanwhile, continues to decline, from 3.3 percent a year ago to 2.8 percent in Q3 of 2022 and 2.7% in Q4 of this year.

The latest trends–zombie foreclosure numbers up slightly but remaining tiny–again reflect one of many high points from a housing market that has seen 11 years of nearly uninterrupted gains. Median home values nationwide have more than doubled since 2012, home-seller profits have shot up over 50% and the vast majority of homeowners have equity built up in their homes. Those forces provide enormous incentive for owners behind on their mortgages to do everything they can to avoid abandoning their properties even as foreclosure activity increases.

Home values dipped over the Summer of this year amid rising interest rates, a declining stock market and soaring inflation that have cut into what buyers can afford. However, that has yet to significantly boost the presence of vacant properties in foreclosure.

Zombie foreclosures inch up again but remain a small portion of overall market

A total of 7,722 residential properties facing possible foreclosure have been vacated by their owners nationwide in Q4 of 2022, up slightly from 7,707 in Q3 of 2022 and from 7,432 in Q4 of 2021.

While zombie foreclosures continue to be few and far between in most neighborhoods around the U.S., the biggest increases from the third quarter of 2022 to the fourth quarter of 2022 in states with at least 50 zombie properties are in Kansas (zombie properties +32%, from 44 to 58), Nevada (+25% from 81 to 101), Connecticut (+15%, from 65 to 75), Georgia (+15% from 72 to 83), and Indiana (+13% from 239 to 270).

The biggest quarterly decreases among states with at least 50 zombie foreclosures are in Michigan (zombie properties -23%, from 99 to 76), New Jersey (-12% from 240 to 211), North Carolina (-10% from 144 to 130), Ohio (-9% from 925 to 841), and Maine (-7% from 72 to 67).

New York has the highest overall number of zombie homes to all residential properties (1,995 pre-foreclosure vacant properties), followed by Florida (1,030), Ohio (841), Illinois (780) and Pennsylvania (368).

“Low vacancy rates are also a major factor in there being few zombie homes,” Sharga added. “And with demand from both traditional homebuyers and investors still relatively strong, and the inventory of homes for sale still very low, vacancy rates for residential homes is about as low as it’s ever been,”

Overall vacancy rates dip for third straight quarter

The vacancy rate for all residential properties in the U.S. has dropped for three quarters in a row. It now stands at 1.26% (one in 79 properties), down from 1.28% in Q3 of 2022 (one in 78) and from 1.33% in Q4 of last year (one in 75).

States with the biggest annual drops are Tennessee (down from 2.3% of all homes in Q4 of 2021 to 1.25% in Q4 of this year), Minnesota (down from 1.18% to 0.81%), Wisconsin (down from 1.02% to 0.69%), Georgia (down from 1.79% o 1.5%) and Oregon (down from 1.14% to 0.94%).

High-level findings from Q4 of 2022:

Among metropolitan statistical areas in the U.S. with at least 100,000 residential properties and at least 100 properties facing possible foreclosure in Q4 of 2022, the highest zombie rates are in Wichita, Kansas (12.7% of properties in the foreclosure process are vacant); Peoria, Illinois (9.9%; Syracuse, New York (8.2%); Toledo, Ohio (7.8%) and Cleveland, Ohio (7.1%).

Aside from Cleveland, the highest zombie-foreclosure rates in major metro areas with at least 500,000 residential properties and at least 100 homes facing foreclosure in Q4 of 2022 are in Baltimore, Maryland (6.1% of homes in the foreclosure process are vacant); Pittsburgh, Pennsylvania (5.6%); Portland, Oregon (5.5%) and Indianapolis, Indiana (5.4%).

Among the 26.8 million investor-owned homes throughout the U.S. in Q4 of 2022, about 868,000 are vacant, or 3.2%. The highest levels of vacant investor-owned homes are in Indiana (6.8% vacant), Kansas (5.8%), Oklahoma (5.3%), Alabama (5.3%) and Ohio (5.2%).

Among the roughly 5,000 foreclosed, bank-owned homes in the U.S. during Q4 of 2022, 9.3% are vacant. In states with at least 50 bank-owned homes, the largest vacancy rates are in Illinois (21.2% vacant), Ohio (13.3%), New York (12,.3%), Florida (11.4%) and Maryland (11.2%).

The highest zombie-foreclosure rates in U.S. counties with at least 500 properties in the foreclosure process during the fourth quarter of 2022 are in Baltimore County, MD (12.4% zombie foreclosures); Broome County (Binghamton), New York (11.5%); Peoria County, Illinois (11.2%); Pinellas County (Clearwater), Florida (9%) and Onondaga County (Syracuse), New York (8.6%).

Among 424 counties with at least 50,000 residential properties homes facing possible foreclosure in Q4 of 2022, zombie foreclosures represent the highest portion of overall residential properties in Broome County (Binghamton), New York (one of every 620 properties); Peoria County, Illinois (one of every 1,184); Cuyahoga County (Cleveland), Ohio (one of every 1,226); Suffolk County, New York (eastern Long Island) (one of every 1,259) and Bronx County, New York (one of every 1,347).

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