Investors Can Find Opportunities in Repossessed Homes

Real estate investors looking for bargains may find them at the bank auctions that are sure to follow a spike in foreclosures.

Foreclosure filings were reported on 324,237 properties across the country in 2022, up 115% from 2021 but down 34% from 2019 before the pandemic rocked the market, according to real estate data provider ATTOM’s Year-End 2022 U.S. Foreclosure Market Report. Foreclosure filings for 2022 were also down 89% from a peak of nearly 2.9 million in 2010.

Foreclosures are down significantly despite the end of the government’s foreclosure moratorium 18 months ago, said Rick Sharga, executive vice president of market intelligence at ATTOM. In addition, less than 5% of the 8.4 million borrowers who entered the Coronavirus Aid, Relief and Economic Security (CARES) Act forbearance program remain, he said.

“It seems clear that government and mortgage industry efforts during the pandemic, coupled with a strong economy, have helped prevent millions of unnecessary foreclosures,” Sharga said.

Lenders repossessed 42,854 properties through foreclosures in 2022, up 67% from 2021 but down 70% from 2019 when they took back 143,955 properties and down 96% from a peak of 1 million in 2010.

Where Foreclosures Are Concentrated

The metropolitan statistical areas (MSAs) with a population of more than 1 million that saw the most repossessions included Chicago, Detroit, New York, St. Louis and Philadelphia.

“Unlike foreclosure activity during the Great Recession, the majority of homes in foreclosure are not being repossessed by lenders,” Sharga said. “Our recent homeowner equity report shows that 93% of borrowers in foreclosure today have positive equity, which they appear to be leveraging in order to avoid foreclosure by refinancing their mortgage or selling the property as a profit. It seems like this is a trend that will continue in 2023.”

While they may not be repossessing properties at the rate they were in 2019, lenders still started the foreclosure process on 248,170 properties in 2022, up 169% from 2021 but down 26% from 2019 and down 88% from a peak of 2.1 million in 2009.

The states with the greatest number of foreclosure starts in 2022 were California at 27,269; Texas at 23,151; Florida at 22,968; Illinois at 16,941; and Ohio at 13,469.

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The MSAs with a population of greater than 1 million that saw the most foreclosure starts last year were New York City at 15,821; Chicago at 14,360; Los Angeles at 8,185; Philadelphia at 7,286; and Miami at 7,090.

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