Home Foreclosures Are Creeping Back Up: What’s Behind the Rise?

After years of historically low foreclosure rates, the tide is turning. Foreclosures are up 40% year over year, though they remain 13% below pre-pandemic 2019 levels. This shift signals growing distress in the housing market, leaving many wondering: What’s driving the increase?

The End of Pandemic Protections

During the COVID-19 crisis, the federal government implemented foreclosure moratoriums and forbearance programs to shield homeowners from financial hardship. These measures kept foreclosure rates artificially low. However, as these protections expired, foreclosure activity has steadily returned, inching closer to pre-pandemic levels.

Rising Mortgage Delinquencies

Before foreclosures spike, mortgage delinquencies—particularly those 90+ days overdue—typically rise first. While credit card and auto loan delinquencies have surged recently, mortgage delinquencies remain below 2019 levels. However, 30+ day mortgage delinquencies have already returned to pre-pandemic levels, suggesting foreclosures may continue to climb.

Economic Pressures and Inflation

High inflation and rising interest rates have made homeownership more expensive. Many homeowners who purchased properties at peak pandemic prices are now struggling with increased mortgage payments. Additionally, student loan delinquencies have surged to a five-year high, potentially limiting access to mortgages and pushing more borrowers into financial distress.

Regional Variations in Foreclosure Rates

Certain states are experiencing higher foreclosure rates than others. Illinois, Delaware, New Jersey, Maryland, and Nevada have seen the most significant increases. Additionally, metropolitan areas like Fayetteville, Cleveland, Atlantic City, Columbia, and Bakersfield are facing elevated foreclosure rates.

What’s Next for the Housing Market?

While foreclosure rates are rising, they are still below pre-pandemic levels. Many homeowners have built significant equity due to rising home prices, which may help prevent a full-blown foreclosure crisis. However, if economic pressures persist, foreclosures could continue to climb throughout 2025 and beyond.

For more details, you can check out the full report here. What are your thoughts on this trend?