More borrowers are falling behind, raising concerns about economic stability
After months of steady foreclosure activity, new filings jumped in February, raising concerns about whether the US housing market is showing early signs of economic strain.
Foreclosure filings (which include default notices, scheduled auctions, and bank repossessions) climbed to 32,383 properties last month, a 5% increase from January, according to ATTOM’s latest foreclosure market report
Despite the month-over-month jump, foreclosure activity remains 1.7% lower than a year ago. However, the increase in foreclosure starts, which are up both monthly and annually, suggests growing economic strain.
"February's rise in foreclosure filings suggests evolving market pressures," said Rob Barber, CEO of ATTOM. "While some increase may reflect seasonal trends, the uptick in foreclosure starts both month-over-month and year-over-year signals potential shifts. We'll continue monitoring how economic factors influence foreclosure activity moving forward."
While it’s too early to call a full-blown crisis, growing concerns over inflation, high mortgage rates, and economic uncertainty have economists keeping a close watch on foreclosure trends.
Economists see a 30% chance of a recession in both 2025 and 2026, pointing to a mix of stubborn inflation, cooling consumer demand, and rising loan delinquency rates.
Though inflation is expected to hover around 3%, economists believe consumers won't tolerate significantly higher prices, potentially leading to a broader economic slowdown. Meanwhile, mortgage rates are projected to remain high, averaging 6.9% in 2025 and 6.5% in 2026 - further straining affordability.
The American Bankers Association’s economic advisory committee anticipates that the Federal Reserve will begin easing monetary policy, cutting rates twice in 2025 and twice in 2026. However, these small cuts won’t be enough to prevent an increase in loan delinquencies and weaker consumer credit quality, according to analysts.
Foreclosure activity by the numbers
While foreclosure filings have risen overall, ATTOM’s report showed lender repossession activity (REOs) continues to decline, reflecting a longer-term trend of fewer completed foreclosures. In February, lenders took control of 3,031 properties, up just under 2% from January but down 11% from a year ago.
Several states saw significant annual declines in REOs, including New York (-49%), South Carolina (-44%), New Jersey (-43%), Pennsylvania (-35%), and Ohio (-34%).
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On a national scale, one in every 4,395 housing units had a foreclosure filing in February. The states with the highest foreclosure rates included Delaware (one in every 2,278 housing units), Illinois (one in every 2,333 housing units), Nevada (one in every 2,435 housing units), New Jersey (one in every 2,695 housing units), and South Carolina (one in every 2,816 housing units).
Lenders initiated foreclosure proceedings on 22,730 US properties in February, reflecting an 8% increase from January and a 1% increase year-over-year. States that recorded notable monthly increases in foreclosure starts included New Jersey (up 78%), Colorado (up 58%), Iowa (up 57%), Georgia (up 42%), and South Carolina (up 29%).
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