Gone are the days of surfing real estate listings far beyond their reach, many budget-minded Americans have instead begun scrolling foreclosures.
Foreclosure listings received more than 26% more page views than the average listing in the first half of the year, according to a new report from Realtor.com. Interest in these listings is an indication of the challenges many buyers are facing, according to Joel Berner, senior economist at the Austin-based real estate site.
“In a market where affordability is still the dominant challenge, foreclosures offer a path to a meaningful discount,” Berner said in a statement.
Indeed, bargain hunters can find some bargains by giving foreclosures a chance: The median foreclosed home sold for 27% below its estimated value, according to the report.
Interest in foreclosures is the latest indication of some recent shifts in the housing market chronicled by Realtor.com. Recent reports have found that buyers have more leverage as overpricing listings has become a costlier mistake, while June marked a record drop in home listing prices.
RETURN TO NORMAL
While budget-minded buyers may find more bargains with foreclosures, there hasn’t been a big uptick in the number of foreclosures, as happened during the Great Recession.
Foreclosures made up 1.3% of all homes listed on the market as of April, the highest share since the 1.7% share in April 2020. And Berner emphasized that the housing market is simply returning to 2019-era norms rather than accelerating into another foreclosure crisis.
“This rise is happening because pandemic-era forbearance and moratorium programs fully wound down in 2024, and the homeowners feeling it most are the ones who bought at peak prices and are now squeezed by rising insurance, taxes, and adjustable-rate payments,” Berner said.
However, some housing markets are seeing a more notable uptick in the share of foreclosures on the market—and they tend to be more affordable markets where buyers entered into homeownership with thinner margins, according to Berner. Among the top 100 metro areas, the five markets with the highest share of foreclosures on the market are:
Lake Charles, Louisiana: 10.2%
Tuscaloosa, Alabama: 7.7%
Dayton-Kettering-Beavercreek, Ohio: 6.0%
Davenport-Moline-Rock Island, Iowa and Illinois: 5.7%
Montgomery, Alabama: 5.7%
WHY FORECLOSURES TAKE LONGER TO MOVE
While people may be busily scrolling foreclosures, they’re not exactly snatching up these homes. Foreclosures are sitting on the market 11 days longer than the average listing, according to the Realtor.com data.
Part of the reason why that may be happening is that the process has some speedbumps. If a foreclosure home fails to sell at auction it becomes what’s known as Real Estate Owned, or REO, property. While lenders may be keen to sell the home, they may not put so much effort into the listing itself.
Realtor.com found that REO listings had about 30% fewer photos and their descriptions were one-third shorter than standard listings. What’s more, the homes are typically sold as-is, which means buyers may need to more closely inspect what they’re getting into before they commit.
Even so, many would-be buyers feel priced out—which helps explain why America’s first-time homebuyer is now 40—and foreclosures may offer a viable foot in the door.
“The process takes patience, but for buyers who are prepared and can navigate the challenges of buying this type of home, the savings are real,” Berner said..