Foreclosure Filings Increase Significantly in 2022

2022 foreclosure filings

After two years of unusually low foreclosure activity, filings have picked up substantially throughout the first half of 2022 according to data released in July. Data analytics firm ATTOM Data shows that first-half foreclosure filings went up a whopping 153% in the first half of 2022 compared to the year prior. While some media outlets have reported on this as a signal of a pending housing market crash, however – here at Pimlico Capital, we’re not so surprised by these numbers. Let’s talk about why that’s the case.

Foreclosure Activity Has Been at Historically Low Levels

Signs of the Covid-19 Pandemic still surround us as facemasks have become almost a fashion statement since April of 2020. As the pandemic hit the United States, local, state, and federal governments all put specific measures in place to protect Americans from feeling the dramatic effects of a nearly overnight shift in the economy. Entire industries were upended, and millions of Americans found themselves either having hours cut, or losing their jobs entirely. As a result, moratoriums on evictions and foreclosures were put into place, bringing foreclosure activity down to almost zero.

Now that restrictions have been lifted, it’s not surprising to see a significant increase in foreclosures, and in many ways, it’s welcome news. A wave of foreclosures eases the strain on tight inventory, and leaves a little more wiggle room for both investors and first-time homebuyers seeking good deals on properties.

Foreclosure Filings Are Still Not at Pre-Pandemic Levels

Foreclosures in the first half of 2022 were still down 1% compared to the same period in 2020 when eviction and foreclosure moratoriums first went into place, which in turn was down over 44% compared to the first half of 2019. In fact, since 2010, foreclosure filings have been on a steady decline, so this is the first time in several years that activity has actually picked back up. Given rising inflation and housing prices in recent months, we wouldn’t be surprised to hear of further increases, although we have yet to see signs of foreclosures trending upwards in the long-run.

Where are Foreclosures Happening in 2022?

The following states saw the highest foreclosure rates through the first half of 2022:

  • Illinois (0.26% of housing units)
  • New Jersey (0.24%)
  • Ohio (0.21%)
  • Delaware (0.20%)
  • South Carolina (0.19%)

Within the above states, the cities of Cleveland, OH; Atlantic City, NJ; Chicago, IL; and Columbia, SC were among the metro areas most heavily affected by the increase in foreclosure filings.

What Does This Mean for Real Estate Investors?

If you’re a real estate investor, this probably comes across as good news since foreclosed properties are typically better buys than properties bought direct from the previous homeowners. Good deals have been hard to come by in recent years, so hopefully this is a sign of a break in pricing that could benefit the housing market overall and make it easier for investors to find better deals.

While mortgage rates shot up in response to a rising Federal Funds Rate in early 2022, mortgage rate increases have slowed significantly. If they pick back up, however, we can expect to see more foreclosures coming as homeowners with adjustable rate mortgages are impacted by increased housing costs. As the economy teeters on the brink of a recession, we may also see further increases in foreclosures.

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