Number of vacant ‘zombie’ properties dipped in 3Q

The number of vacant “zombie” homes fell recently after a prior increase, but it could eventually resume its rise as foreclosure bans get phased out, according to Attom Data Solutions.

The amount of pre-foreclosure properties of this type dropped to 7,538 in Attom’s third-quarter report from 8,078 in the prior period and 7,961 a year earlier. With a couple exceptions, the number of zombie properties has generally remained below 8,000 during the pandemic.

However, just prior to the pandemic, vacant pre-foreclosure homes numbered 9,000 or more. Eventually, distressed loans backlogged by discontinued bans could drive numbers back to that level, if not higher, depending on the extent to which strength persists in the housing market, which would deter borrowers from entering the foreclosure process.

The current short-term forecast suggests housing will remain strong, said Todd Teta, chief product officer at Attom, in an email.

“Soaring home values show no sign of dropping in the immediate future, despite many questions swirling around the housing market that could push prices down,” he said.

Strong housing valuations could help hold zombie property numbers relatively low and possibly lead to further decreases in them before they rise again, even in much of New York, the state where they are most concentrated and moratoria have been extended, Teta said. New York accounted for 2,053 or more than 27% of all zombie properties in the latest quarter.

“With double-digit annual price gains in most of the country, big price increases mean more household wealth and potential resale profits. That gives homeowners enormous incentives to avoid foreclosure by keeping up with mortgage payments, or to get out of foreclosure instead of simply walking away and abandoning properties,” said Teta.