Zombies Lurch, Foreclosures Rise — RISMedia

With analysts and real estate insiders widely expecting a pullback in the real estate market in the coming months, it’s possible this is correlated with the return of something many remember as the ugliest signs of the crash of 2008, namely the zombies.

These so-called “zombie foreclosures,” which are homes that are foreclosed and also vacated or abandoned, rose quarter-over-quarter for the first time since the federal eviction moratorium was lifted in fall of last year, according to the latest report from ATTOM Data Solutions.

While some might be alarmed by even this relatively minor 1.9% increase, ATTOM Executive Vice President Rick Sharga said in a statement that the zombie incursion remains more of a “little monster” level threat. rather than an impending “World War Z”.

“According to our Equity Report, nearly 90% of foreclosure homeowners have positive equity. Having equity gives financially distressed homeowners the opportunity for a relatively soft landing, selling their home at a profit rather than losing it all to a seizure,” he said. “This factor alone should prevent the number of zombie seizures from increasing too much.”

Still constituting an almost insignificant proportion of properties nationwide – 7,569 out of nearly 100 million residential properties nationwide. Zombie pre-foreclosures also continued to decline, down 2.9% from last quarter, meaning more recent foreclosure filings are apparently not pushing homeowners to abandon their properties.

Sharga said he attributed the increase to factors that predated the pandemic and were only now showing up in the data.

“The incidence of zombie foreclosures tends to be higher in cases where the foreclosure process has dragged on for several months and sometimes even for years,” he said. “We are now seeing properties where the borrower was already in default before the government moratorium re-entering the foreclosure process, and no doubt some of these homes will have been vacated in the past 26 months.”

Still alive

While an increase in the number of zombies is never a good thing, perhaps more alarming is the significant jump in foreclosures overall, up 12.7% from the first quarter of this year. A total of 259,166 homes are foreclosed.

This is a significant increase, the biggest since the moratorium was lifted, with ATTOM data showing single-digit quarter-on-quarter increases as mortgage lenders appear willing to work with owners in distress rather than starting the foreclosure process. Other pandemic-era protections and aids also figured, with no huge spike in foreclosures when the moratorium ended.

Pre-seizures also grew at a healthy pace, up for the third straight quarter, although zombie pre-seizures were down 2.9% this quarter.

The report says these trends can be included in “a list of metrics” pointing to a possible slowdown this year, even as the market currently looks strong.

Zombie Sectors

The largest increases in zombie properties statewide occurred in Michigan (a 74% increase in zombies), Arizona (up 56%), Georgia (up 29%), in Nevada (up 26%) and Iowa (up 17%). The proportion of investor-owned zombies actually decreased slightly, from 3.4% to 3.2%.

The eligible metros with the highest rate of zombified foreclosure properties were Peoria, Illinois (11.3% of properties in the foreclosure process are vacant); Wichita, Kansas (11.2%); Cleveland, Ohio (9.5%); Syracuse, New York (8.9%) and South Bend, Indiana (8.6%).

Overall vacancy rates across the country fell slightly, to 1.30 million, from 1.35 million last quarter

Of all the eligible counties – those with at least 500 properties in the foreclosure process – only one had no zombie properties in the second quarter of 2022. That safe zone was Contra Costa County outside of Oakland, in California.

About Matthew Berkey

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