Fewer foreclosure auctions in 2025, unless economy slips

It is likely that the number of completed foreclosure auctions will continue their decline in 2025, even after the year-end uptick in 2024, the latest Auction.com forecast said.

Last year's volume was at a three-year low, with only the pandemic-impacted year of 2021 having fewer auctions, based on Auction.com and public record data.

In the last full normal year for foreclosure activity prior to the Covid moratoriums, 2019, approximately 210,000 auctions occurred. Last year's preliminary estimate was 75,000 auctions that took place.
 

Auction.com's baseline case for 2025 is for a further 8% drop to 69,000. A previous report noted scheduled auctions were on the rise at the end of last year and in January.

"Some emerging risks in the economy and housing market are pushing delinquencies higher, but those higher delinquencies will not likely translate into higher foreclosure auction volume until at least early 2026," said Daren Blomquist, Auction.com vice president of market economics, in the outlook.

The baseline scenario is based on forecasts that maintain annual home price growth at around 4% and a 3.8% unemployment rate for the year.

Strong home price growth over the last few years has allowed distressed borrowers to have alternatives to foreclosure. Meanwhile, industry economists have noted that job loss is a driver of mortgage defaults.

But if unemployment is 10 basis points higher than that projection, Auction.com believes the potential number of completed foreclosure auctions could rise year-over-year by 10,000, to 85,000. If it were to occur, it would be the best year for auction activity since 2020.

The second alternative scenario involves the annual home appreciation rate sinking to just 2% and unemployment rising to 4%. In this projection, the year-to-year gain in activity would be 32%, to 99,000.

Recent data around distressed borrowers has been discouraging. Delinquency rates have increased for seven consecutive months on an annual basis, ICE Mortgage Technology said. That growth in late payments is likely to continue given the scope of the damage in the Los Angeles-area wildfires.

The Auction.com report did note that the number of mortgages 90 days or more late on their payment, also known as serious delinquencies, was at a higher level in the third quarter compared with the first quarter of 2020, 868,093 versus 866,095.

But the foreclosure inventory has not moved in concert. In the third quarter, 252,027 properties were in the inventory, compared with 378,592 in the first quarter of 2020.

Those numbers come from Mortgage Bankers Association and Attom Data Solutions statistics.

"While the number of distressed homeowners has returned to pre-pandemic levels, many are avoiding foreclosure thanks to ample home equity that allows them to sell through a pre-foreclosure sale," including using a platform like Auction.com to accomplish that, the company's president, Ali Haralson, said in the report.