Foreclosures rise in October, a sign of housing market distress

Foreclosure filings rose again in October after remaining at historic lows in recent years, according to new data released Thursday.

Although the numbers are still small, the persistent increase in foreclosures could be a sign of cracks in the housing market.

There were 36,766 U.S. properties filing for some form of foreclosure in October, such as notices of default, scheduled auctions or bank foreclosures, according to ATTOM, a real estate data and analysis firm. This is a 3 percent increase from September and a 19 percent increase from October 2024, marking the eighth consecutive monthly annual increase, ATTOM said.

Foreclosure starts, the first phase of the process, increased by 6% for the month, making them 20% higher than the previous year. Competitive foreclosures, the final stage, were up 32% from the previous year.

“Despite these increases, activity remains well below historic highs. The current trend appears to reflect a gradual normalization in foreclosure volumes as market conditions adjust and some homeowners continue to turn to higher housing and borrowing costs,” ATTOM CEO Rob Barber said in a statement.

Florida, South Carolina and Illinois led the nation in state foreclosure filings. At the metropolitan area level, Florida’s Tampa, Jacksonville and Orlando had the most applications, while Riverside, California and Cleveland, Ohio rounded out the top five.

Looking specifically at completed foreclosures, Texas, California, and Florida have the highest rates; This suggests that these states will bring more stock to the market at distressed prices. There is still very strong demand for homes, especially in the lower price ranges, so foreclosed properties are likely to find buyers quickly.

At the height of the Great Recession, more than 4% of mortgages were in foreclosure, according to Rick Sharga, CEO of real estate market intelligence firm CJ Patrick Company. Today, less than 0.5% are in foreclosure; this rate is well below the historical average of 1% to 1.5%. Additionally, 4% of mortgages are past due; At the peak of the financial crisis it was almost 12%.

“So there’s nothing to worry about with the foreclosure tsunami,” Sharga said. “However, there are several areas of concern. [Federal Housing Administration] defaults are over 11% and account for 52% of all seriously delinquent loans; “We’re likely to see more FHA loans in foreclosure in 2026.”

He also noted that states where home prices are falling while insurance premiums are rising (particularly Florida and Texas) are seeing an increase in delinquencies.

While home prices are falling across the country, they remain stubbornly high. Meanwhile, mortgage interest rates, which are expected to fall more sharply after the Federal Reserve begins cutting interest rates, are still within a percentage point of their recent highs. Some new buyers who until now thought they could refinance to lower interest rates may be feeling the pressure, especially with inflation still stubborn.

Consumer debt is at an all-time high, defaults on other types of consumer loans are rising, and the job market appears to be weakening; All of these can contribute to cracks in the housing market.

“None of these issues have yet impacted mortgage performance, but it would be unrealistic to assume that these trends, along with slow home sales and declining home price appreciation, will not lead to at least a slight increase in delinquencies and delinquencies in the coming months,” Sharga added.