The latest housing market data reveals a troubling trend. Foreclosures are rising again, marking a shift from the unusually low levels seen during the pandemic years. The Federal Reserve Bank of New York’s Household Debt and Credit Report confirms that distress is creeping back into the market, with 61,660 foreclosures recorded in the first quarter of 2025. This figure represents a sharp increase from 44,180 in Q1 2024 and is approaching pre-pandemic levels.
The foreclosure crisis had been largely contained due to government intervention. When COVID-19 lockdowns began, the federal government implemented a nationwide foreclosure moratorium, shielding homeowners from economic fallout. Forbearance programs extended relief, allowing borrowers to delay payments without immediate consequences. At the same time, a surge in housing demand drove home prices to record highs, boosting homeowner equity and keeping foreclosure rates artificially low.
The expiration of these protections has changed the landscape. The moratorium on foreclosures for home loans backed by the U.S. Department of Veterans Affairs ended recently, contributing to the uptick in distressed properties. The market is now adjusting to a reality where struggling homeowners no longer have government-backed safety nets.
Price trends across major metro areas reflect the shifting conditions. The national year-over-year price gain has shrunk to just 0.7 percent, signaling a slowdown in appreciation. Eighteen of the largest 33 housing markets have recorded price declines, including San Diego, Austin, Tampa, Miami, San Francisco, San Antonio, Dallas, Phoenix, Orlando, Atlanta, Denver, Raleigh, Houston, Birmingham, and Charlotte. Even traditionally strong markets like Los Angeles, Boston, Chicago, New York, Philadelphia, and Columbus are seeing gains shrink.
The question now is whether foreclosures will continue rising throughout 2025 and into 2026. Historically, 90-day mortgage delinquencies serve as a leading indicator of foreclosure activity. While credit card and auto loan delinquencies have surged, mortgage delinquencies remain below pre-pandemic levels. However, the trend is shifting, and financial analysts warn that student loan delinquencies have hit a five-year high, potentially impacting borrowers’ ability to qualify for home loans.
The housing market is entering a new phase. The artificial stability created by government intervention is fading, and economic pressures are beginning to take hold. Homeowners facing financial difficulties may struggle to keep up with payments, leading to further increases in foreclosure rates. Investors and policymakers will need to monitor these developments closely as the market adjusts to post-pandemic realities.
Sources
https://www.fastcompany.com/91335759/housing-market-shift-home-foreclosures-are-coming-back