Zombie Foreclosures Tick Up As Overall Foreclosure Activity Accelerates

Zombie foreclosures rose 3% from Q1 to Q2 2022, the first increase in a year, as overall foreclosure activity jumped 13%, ATTOM reported.

Zombie properties– homes that sit vacant– account for 1.3 million properties in the U.S. That is one in every 76 homes.

Among pre-foreclosure properties, 7,569 sit vacant in Q2, meaning that the number of zombie-foreclosure properties rose quarterly by 2.8%.

Foreclosures are up 12.7% from Q1 2022 and 15.9% YOY, with 259,166 properties in the process of foreclosure in Q2 2022. This is the third consecutive quarter of increases since the national foreclosure moratorium was lifted in July 2021.

“The incidence of zombie-foreclosures tends to be higher in cases where the foreclosure process has dragged on for many months and sometimes even for years,” said Rick Sharga, executive vice president of market intelligence at ATTOM. 

“We’re now seeing properties where the borrower was already in default prior to the government’s moratorium re-enter the foreclosure process, and undoubtedly some of these homes will have been vacated over the past 26 months.”

However, zombie foreclosures only represent one in every 13,200 residential properties and are down 6.3% YOY, meaning that most neighborhoods have no zombie properties. The portion of pre-foreclosure properties that have been abandoned into zombie status is also down from 3.6% a year ago to 3.2%.

“Vacant properties are not good for anyone,” professor Marie Reilly of Penn State University told Courthouse News. “And it’s not always easy to tell if it’s a resident who’s going to be dispossessed, or if it’s a remote investor who’s just abandoning the property.”

Reilly suggested that the Federal Reserve’s interest rate hikes, paired with inflation, could be contributing to the increase in foreclosures. She said these two factors impact property owners without much capital and make it difficult to hold on to their unprofitable buildings.