‘Zombie’ homes decline but foreclosures are rising

The number of “zombie” homes vacant and headed toward foreclosure continues to decline, a trend that could reverse with rising foreclosure activity, according to Attom Data Solutions.

Owners facing possible foreclosure left 7,363 homes vacant in Q1 2022, down from 7,432 in Q4 2021, Attom’s new report said. The decline amounted to 0.9% on a consecutive quarter basis, but the number is up 10.3% from this time last year.

Across the country, 229,864 properties are in the process of foreclosure in Q1, up 3% from the last quarter and 31% year-over-year, Attom reported. Of those properties, 3.2% have been abandoned, down from 3.3% last quarter. The pace of foreclosures won’t trigger a wave of zombie properties but the amount seems likely to head up this year, said Todd Teta, chief product officer at Attom.

“It will depend on how fast the courts process cases and how many delinquent homeowners can catch up on mortgages,” he said in a press release.

The analysis comes after servicers report fewer homeowners in forbearance plans in January compared to December, according to the Mortgage Bankers Association. Still, borrowers are leaving forbearance plans at the slowest pace since June 2020, when the MBA first began tracking exits.

Zombie foreclosures still make up a tiny portion of the nation’s 98.8 million residential properties, amounting to one in every 13,424 homes this quarter, Attom said. The firm analyzes data from county assessor tax data broken down by foreclosure and owner-occupancy status, and only looks at metropolitan areas with at least 100,000 properties and counties with at least 50,000 properties.

The amount of pre-foreclosure properties increased for the second-straight quarter since a nationwide moratorium on lender takeovers was lifted last July. But the amount of properties is likely to remain low in today’s supply-starved market, said Rick Sharga, executive vice president of Attom affiliate RealtyTrac.

“With $23 trillion in homeowner equity, and demand outstripping supply, most distressed borrowers should be able to sell their home at a profit before the process drags on,” he said in a press release.

Northeast and Midwest states had the highest zombie property counts, with New York reporting 2,074 in Q1 2022. In Wichita, Kansas, 14.8% of properties were in zombie status in Q1 2022, the highest rate among the nation’s metros. Among major metros with at least 500,000 properties, Cleveland had the highest rate of zombie properties at 10.8% of its inventory.