2025 Preforeclosure Market Study: Key Insights

The 2025 preforeclosure market is shifting, with foreclosure filings rising 11% in Q1 2025 compared to the previous quarter. While levels remain below historical peaks, economic pressures are pushing some homeowners into distress. Here's what you need to know:

• 93,953 properties received foreclosure filings in Q1 2025.
• States with the highest foreclosure rates: Delaware (1 in 761 homes), Illinois (1 in 857), and Nevada (1 in 874).
• April 2025 saw 36,033 foreclosures, up 13.9% year-over-year.
• High homeowner equity and low fixed-rate mortgages are keeping foreclosure rates relatively low, but rising debt and inflation are creating challenges.
• Climate risks and increasing insurance costs could drive future foreclosures.

For investors, this data highlights opportunities in states with high foreclosure activity and metro areas like Chicago, New York, and Houston, which lead in volume. Tools like LeadList.Pro can help identify preforeclosure properties early, offering a competitive edge.

Economic trends, regional variations, and emerging risks make 2025 a critical year for those navigating the preforeclosure market.

Is the Foreclosure Wave Back? These States Are Leading the Surge! April 2025 Housing Market Report

National Preforeclosure Activity in 2025

The preforeclosure landscape in 2025 is showing gradual growth after three consecutive quarters of decline. While foreclosure activity has started to climb again, it remains far below historical highs.

Steady Preforeclosure Filing Rates

Monthly data paints a picture of modest, steady growth with minor fluctuations, reflecting a market in transition. In January 2025, about 30,816 U.S. properties faced foreclosure filings, a number that climbed to 36,033 in April (a 13.9% increase compared to the previous year) and slightly dipped to 35,498 in May (still up 9% year-over-year) [7] [8] [9]. For context, May’s numbers equate to one foreclosure for every 4,009 housing units nationwide [8].

Rob Barber, CEO of ATTOM, shared his perspective on the shifting foreclosure patterns:

"Foreclosure activity in May reflected a mixed picture with fewer starts but a continued rise in completed foreclosures. This suggests that while fewer new defaults are being initiated, lenders may still be working through a backlog of existing cases" [8].

To break it down:

• Foreclosure starts represent new defaults. Lenders initiated foreclosures on 25,265 properties in April, a 16.1% jump from the previous year, before a slight 4% dip in May to 24,165 properties - still an 8% annual increase [8] [9].
• Completed foreclosures, which signal the final lender actions, saw the sharpest growth. In April, 3,580 properties were repossessed through REO (Real Estate Owned), a 23.3% increase year-over-year. By May, this number rose to 3,844 properties, reflecting a 7% monthly increase and a striking 34% annual gain [8].

Additionally, properties foreclosed in the first quarter of 2025 had spent an average of 671 days in the foreclosure process, marking a 12% drop from the previous quarter and a 9% reduction compared to the same period in 2024 [6].

These trends provide a foundation for understanding the economic forces shaping the preforeclosure market in 2025.

Economic Factors Affecting Preforeclosure Rates

The broader economic environment continues to play a key role in shaping preforeclosure rates. A combination of economic pressures and strong homeowner equity is influencing the landscape in 2025. High homeowner equity and low fixed-rate mortgages are helping keep foreclosure rates relatively low [7].

Over the past few years, rising home values have built a financial safety net for many homeowners. Between March 2020 and June 2024, median home prices nationwide increased by 52% [10]. This surge contributed to a total home equity value of $32.8 trillion in Q1 2024 [10]. For homeowners facing financial struggles, this equity often provides alternatives to foreclosure, such as selling their homes or refinancing.

However, rising debt levels remain a concern. U.S. household debt reached a record $16.9 trillion in Q4 2022, with mortgages accounting for 71% of that total [10]. Coupled with inflation and ongoing economic uncertainty, this debt burden explains why some homeowners are beginning to feel the strain.

Rob Barber highlighted this delicate balance:

"While levels remain below historical averages, the quarterly growth suggests that some homeowners may be starting to feel the pressure of ongoing economic challenges. However, strong home equity positions in many markets continue to help buffer against a more significant spike in distress" [6].

The numbers from the past put today’s situation into perspective. During the Great Recession, foreclosure filings hit a peak of 2.9 million in 2010 [7]. By comparison, in 2024, the national foreclosure rate was just 0.23% of all housing units, totaling 322,103 properties - a 10% drop from 357,893 in 2023 [7].

While economic disruptions, rising interest rates, or challenges like homeowners' insurance in disaster-prone areas could lead to higher foreclosure rates [7], there’s no evidence yet of widespread distress. The gradual increases in foreclosure activity suggest that while some homeowners are facing difficulties, the market overall remains steady.

For investors, these insights can help identify markets that are weathering economic challenges well, offering opportunities to refine strategies and focus on areas of resilience.

State and Regional Market Analysis

National trends offer a helpful snapshot, but the real value for investors lies in dissecting regional differences. Preforeclosure activity isn't uniform across the country, and understanding these variations can uncover key investment opportunities.

Top States for Preforeclosure Activity

In 2025, Delaware, Illinois, and Nevada emerged as states with the highest foreclosure rates. Delaware displayed the most dramatic shift, with foreclosure filings ranging from one per 2,278 housing units in February to one per 761 units during Q1 2025 [12] [14]. Illinois, on the other hand, showed steadier rates, moving from one in 2,333 units in February to one in 857 units in Q1. Nevada followed a similar pattern, with rates shifting from one in 2,435 units in February to one in 874 units during Q1 [12] [14]. For comparison, the national average in Q1 2025 was one filing per 1,515 homes [5].

Rounding out the top five states were New Jersey and South Carolina. In February, New Jersey recorded one foreclosure filing for every 2,695 housing units, while South Carolina saw one for every 2,816 units [12]. By May 2025, there were some changes in the rankings: Delaware held its lead with one filing for every 2,313 units, Florida jumped to second place with one in every 2,536 units, and Illinois remained strong at one in every 2,668 units [15].

"February's rise in foreclosure filings suggests evolving market pressures. 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" [12].

Metro Area Trends and Changes

While state-level data is insightful, metro area trends provide a closer look at local markets. Florida metros dominate the list of highest foreclosure rates, with Lakeland leading the pack at one filing for every 1,506 housing units in May 2025 [13]. Other high-activity Florida metros include Cape Coral (one in 1,674 housing units) and Jacksonville (one in 1,888 housing units) [13].

California also saw significant activity, with Bakersfield reporting one foreclosure for every 1,990 housing units and Riverside at one in 2,031 units [13]. Among larger metros with populations over one million, Cleveland, Ohio led with one filing per 2,064 housing units, followed by San Antonio, Texas (one in 2,202 units) and Chicago, Illinois (one in 2,203 units) [13].

When focusing on the volume of foreclosure starts rather than rates, the rankings shift. In May 2025, New York recorded the most starts with 1,174, followed by Chicago with 1,084, and Houston with 1,017 [13]. Los Angeles and Miami trailed with 782 and 740 starts, respectively [13].

Looking at Q1 2025 as a whole, Chicago led with 3,789 foreclosure starts, followed by New York (3,566 starts) and Houston (3,046 starts) [11]. Miami and Philadelphia rounded out the top five with 2,028 and 1,985 starts [11].

Smaller metros also showed notable activity. Columbia, South Carolina reported the highest foreclosure rate among smaller metros, with one filing for every 683 housing units in Q1 2025 [11]. Other smaller metros with high rates include Lakeland, Florida (one in 694 units) and Bakersfield, California (one in 718 units) [11].

Regional Foreclosure Rate Comparison

Regional data highlights clear patterns that can guide investment strategies. Here's a snapshot of key markets and their metrics:

"Following three consecutive quarters of decline, foreclosure activity ticked up in the first quarter of 2025, with notable growth in both starts and completions" [14].

For investors, these regional differences offer distinct opportunities. High-rate markets such as Delaware, Illinois, and Nevada provide more distressed properties per capita, while high-volume areas like New York, Chicago, and Houston offer a larger pool of opportunities, even if rates are lower. Tailoring your investment strategy to match these market characteristics - whether you prioritize concentrated opportunities in smaller markets or broad selections in major metros - can make all the difference in maximizing returns.

These insights lay the groundwork for pinpointing high-potential markets in future analyses.

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What's Driving 2025 Preforeclosure Trends

Understanding the factors behind preforeclosure activity is key for investors looking to identify opportunities and adapt to market changes. In 2025, the landscape is shaped by economic challenges, homeowner equity, and emerging risks that influence where and when distressed properties surface.

Economic Pressures and Market Response

Rising interest rates, inflation, and economic uncertainty are pushing more homeowners into financial distress in 2025 [16][17]. Mortgage affordability has taken a hit due to Federal Reserve policies, making it harder for some homeowners to keep up with payments.

The housing market has also slowed significantly. U.S. home sales dropped another 0.7% in May 2025, with April marking the slowest housing activity since the post-2009 crash period [17]. For homeowners facing financial strain, this sluggish market limits their ability to sell properties quickly and avoid foreclosure.

Financial analyst Meredith Whitney highlighted the broader implications of these challenges:

"This isn't just about real estate. This is about the broader economy, consumer confidence, and the long-term stability of the American middle class" [17].

Despite these pressures, foreclosure activity remains relatively stable compared to historical highs. In January 2025, foreclosure filings were reported on approximately 30,816 U.S. properties, an 8% increase from December 2024 but still 7% lower than January 2024 [7]. While economic stress is evident, other factors are helping to prevent a dramatic spike in distressed properties. One of the key stabilizing forces is homeowner equity.

Homeowner Equity and Market Stability

Homeowner equity continues to act as a safety net against foreclosure. With total homeowner equity in the U.S. exceeding $35 trillion, many homeowners in financial distress can sell their homes rather than lose them to foreclosure [10].

Rick Sharga, Founder and CEO of CJ Patrick Company, explained this dynamic:

"A significant factor contributing to today's comparatively low levels of foreclosure activity is that homeowners - including those in foreclosure - possess an unprecedented amount of home equity" [19].

Similarly, Ali Haralson, President of Auction.com, noted:

"While the number of distressed homeowners has returned to pre-pandemic levels, many are avoiding foreclosure thanks to ample home equity that allows them to sell through a pre-foreclosure sale" [18].

Other stabilizing factors include low fixed-rate mortgages, which keep payments affordable for many homeowners despite rising interest rates, and loss mitigation programs designed to help borrowers avoid foreclosure [7]. These elements collectively help sustain market stability, even as economic pressures mount. However, investors should keep an eye on shifts in equity trends, as these could signal changes in the market.

Potential Market Risks for 2025

While homeowner equity provides some stability, several risks could disrupt the preforeclosure landscape. Climate-related disasters and rising insurance costs are emerging as significant threats [5].

Insurance affordability is becoming a critical issue in high-risk areas. First Street, a research firm, predicts that foreclosure rates will rise by about 1% for every 1% increase in insurance costs [5]. This creates a direct connection between climate risk and foreclosure activity - a dynamic that wasn’t as prominent in previous market cycles.

The long-term outlook is even more alarming. First Street projects a 380% increase in foreclosures over the next decade due to climate-related incidents such as flooding, wildfires, and severe storms [5]. While this forecast spans a 10-year period, it underscores how rising insurance costs could contribute to a housing crisis [5].

Other risks include economic disruptions and continued interest rate hikes, which could further strain market stability [7]. However, experts suggest that any significant increase in foreclosure activity may not materialize until 2026.

Daren Blomquist, VP of Market Economics at Auction.com, offered this perspective:

"Emerging risks in the economy and housing market are pushing delinquencies higher, but those higher delinquencies will not likely translate into higher foreclosure auction volume until at least early 2026" [18].

For investors, these risks present both challenges and opportunities. Markets with high climate risk could see an increase in distressed inventory, while regions with stable insurance costs and solid economic conditions may remain relatively unaffected. Adapting investment strategies to account for these regional variations and potential risks will be crucial in navigating the evolving 2025 preforeclosure market.

How Real Estate Investors Can Use This Data

The 2025 study provides actionable insights for real estate investors looking to capitalize on market trends. By focusing on targeted regional growth patterns, investors can identify opportunities to build profitable portfolios while assisting distressed sellers.

Finding High-Opportunity Markets

The study highlights geographic patterns that can guide investment decisions. For instance, states like Delaware (1 in every 761 housing units), Illinois (1 in 857), and Nevada (1 in 874) had the highest foreclosure rates in early 2025 [5]. These areas represent concentrated opportunities for investors seeking deals.

For those aiming for volume, states like California, Florida, and Texas stand out. California led with 10,701 foreclosure filings in Q1 2025, followed by Florida with 9,524 and Texas with 9,354 [5]. While these states offer substantial inventories of distressed properties, the larger market size often means more competition.

"Market volatility can create real opportunities for buyers and investors - if they know where to look" [21].

Emerging markets with rapid increases in foreclosure activity, like Arizona and Virginia, also show promise. Foreclosure filings surged by 73% in Arizona and 57% in Virginia [21], signaling potential opportunities before these markets attract widespread investor attention.

Additionally, markets with high cancellation rates can indicate economic stress and potential preforeclosure activity. In April 2025, Southern markets such as Atlanta, Orlando, and Riverside, CA, reported cancellation rates above 18% [22]. These trends can serve as early indicators for investors to explore.

"Real estate investors can help relieve the housing affordability crisis by identifying off-market opportunities and adding inventory to the market" [20].

Identifying these markets is just the first step. Staying ahead with timely insights and data is critical for maintaining a competitive edge.

Using Real-Time Data Tools

Access to real-time data is a game-changer for investors. Reliable tools help identify foreclosure statuses and enable quick, informed decisions.

"I spend hours every week reviewing foreclosure notices and preforeclosure lists because the real deals never make it to Zillow or RealtyTrac" [3].

For example, Massachusetts investors can use LeadList.Pro, which provides weekly probate and preforeclosure leads enhanced with AI insights and manual verification. This service offers distress scores, real-time court data, and organized property information in CSV format, saving significant time and effort compared to manually searching public records.

The impact of such tools is evident. In March 2023, Metro Realty Group partnered with Power App by TechSolutions, leading to an 18% boost in profitability and a 30% improvement in investment accuracy due to better data-driven decisions [23]. Similarly, RE/MAX utilized real estate analytics to refine its marketing strategies, resulting in a 20% increase in leads [23].

Investors can also tap into public records for early foreclosure signals. Legal notices in local newspapers or county public notice boards are valuable resources [24].

Research Best Practices for Preforeclosure Investing

Once promising markets are identified, thorough research becomes essential. Understanding details like payment history, legal notices, and property status is critical when evaluating foreclosure or preforeclosure properties [24].

Dive deeper into the property's background - assess its condition, neighborhood, and outstanding mortgage balance [24]. This helps clarify potential risks and rewards before moving forward.

Conducting a detailed title search is non-negotiable. Hidden liens or encumbrances can quickly turn a profitable deal into a costly mistake, making this step a must for every acquisition [4].

While speed is important, it should never come at the expense of due diligence. The best deals on distressed properties tend to move quickly, so having a system in place to evaluate opportunities efficiently is key [24].

"Discovering that a house is in preforeclosure or foreclosure is just the beginning; knowing how to act next is what sets smart investors and buyers apart" [24].

When approaching distressed homeowners, empathy and respect are crucial. Offer educational resources and guidance on foreclosure prevention options [25]. A consultative approach that addresses their unique financial challenges and motivations builds trust and often leads to mutually beneficial outcomes.

Effective risk management is vital throughout the process. Evaluate potential risks like liens, title issues, property conditions, and market volatility. Conduct thorough inspections, title searches, and financial analyses before finalizing any preforeclosure purchase [25].

State laws also play a significant role. Foreclosure timelines, homeowner rights, and investor obligations vary widely, so understanding local regulations is essential [4].

Lastly, always have a clear exit strategy in place. Whether the plan is to flip, rent, or hold for the long term, a defined strategy ensures better decision-making and profitable results [4].

"It's a good idea to work with a real estate agent who understands foreclosure deals to guide you through the process and help you avoid common pitfalls" [24].

Main Findings from the 2025 Preforeclosure Study

The 2025 preforeclosure market study highlights steady national growth alongside distinct regional differences, creating new opportunities for investors. While overall foreclosure volumes remain far below historical highs, the upward trends signal shifts in market dynamics worth noting.

National and Regional Trend Summary

Foreclosure activity across the U.S. is on the rise but remains manageable. In April 2025, 36,033 properties filed for foreclosure, marking a 13.9% increase compared to the previous year [26]. The first quarter of 2025 saw 93,953 filings, an 11% jump from the previous quarter [11]. Nationally, foreclosure starts rose by 2%, while bank repossessions increased 7% quarterly but dropped 20% compared to last year [10].

"April's foreclosure activity continued its gradual climb, with both starts and completions up annually. While volumes remain below historical norms, the year-over-year increases may suggest that some homeowners are beginning to feel the effects of persistent economic pressures." – Rob Barber, CEO at ATTOM [26]

Certain regions stand out as hotspots for preforeclosure opportunities. Among metro areas with populations over one million, Cleveland, OH; Chicago, IL; Riverside, CA; Houston, TX; and San Antonio, TX ranked highest [26]. For foreclosure starts specifically, Houston, TX; Chicago, IL; New York, NY; Miami, FL; and Atlanta, GA led the way in April 2025 [26]. These areas represent strong opportunities for investors prepared to manage competitive conditions.

Economic pressures are shaping predictable patterns in the market. Lenders repossessed 3,580 properties in April 2025 - a 2.9% decrease from March but a 23.3% jump compared to the previous year [26]. While monthly fluctuations occur, the annual trend suggests increasing financial distress for homeowners. Additionally, foreclosure timelines are stabilizing, with slight quarterly increases but a continued decline since mid-2020 [10]. This consistency offers investors more reliable windows for action.

Why Data-Driven Decisions Matter

In a market defined by evolving trends, data-driven tools have become essential for investors aiming to act quickly and strategically. February 2025 saw foreclosure filings increase by 5% month-over-month to 32,383 properties, with lenders initiating proceedings on 22,730 properties, up 8% from January [1]. These shifts underline the need for precise, real-time data to uncover opportunities before competition intensifies.

The study underscores the value of targeting pre-foreclosure leads, described as a "golden window" for investors. During this phase, homeowners are motivated to sell, properties are not yet publicly listed, and equity often remains intact [27]. Leveraging technology to identify, research, and acquire these opportunities is now a key strategy [28].

For example, Massachusetts investors benefit from tools like LeadList.Pro, which provides real-time court data, distress scores, and organized property insights. With weekly updates and AI-powered analytics, these tools streamline the traditionally time-consuming process of foreclosure research.

Accurate, up-to-date data gives investors a competitive edge. The study found that using verified data allows investors to approach distressed homeowners with empathy and tailored solutions, proving far more effective than generic outreach [27]. Multi-channel follow-up strategies further enhance success rates [27].

"The Auction.com marketplace provides rich, real-time data on supply, demand, and pricing for distressed properties sold at auction nationwide." – Jason Allnutt, CEO at Auction.com [2]

Looking ahead, market predictions suggest that opportunities will remain but may become more concentrated. Auction.com's 2025 Distressed Market Outlook projects an 8% decrease in foreclosure auction volume for the upcoming year [2].

"Emerging risks in the economy and housing market are pushing delinquencies higher, but those higher delinquencies will not likely translate into higher foreclosure auction volume until at least early 2026." – Daren Blomquist, VP of Market Economics at Auction.com [2]

This timeline highlights the importance of acting early. Investors armed with quality data tools can identify and secure deals before broader market trends drive up competition and prices.

FAQs

::: faq

What economic factors are driving the rise in preforeclosure cases in 2025?

The surge in preforeclosure cases expected in 2025 is largely tied to rising homeowner insurance costs. Experts estimate that a 1% hike in insurance rates could lead to a comparable increase in foreclosure rates. On top of that, variable mortgage rates, inflation, and broader economic pressures - including the looming possibility of a recession - are adding to the financial strain on homeowners.

Together, these challenges are creating significant financial hurdles for households, driving a clear rise in preforeclosure activity across the U.S. :::

::: faq

How does homeowner equity affect the chances of foreclosure, and why is it seen as a stabilizing factor?

Homeowner equity serves as a powerful buffer against foreclosure by offering financial flexibility. With a healthy amount of equity, homeowners can explore options like refinancing, modifying their loan terms, or even selling their property to steer clear of foreclosure. This equity acts as a safety net, providing stability during tough financial times.

However, the story changes when equity is low or even negative. In such cases, homeowners often face limited options, making it harder to regain financial footing and increasing the risk of losing their home. Building and maintaining equity isn’t just a smart financial move - it’s a critical step in protecting against foreclosure and ensuring long-term stability. :::

::: faq

How could climate change and rising insurance costs impact the preforeclosure market in the coming years?

Climate change is reshaping the preforeclosure market, with rising insurance costs and damage from extreme weather events creating serious hurdles. According to experts, as much as $1.47 trillion in U.S. real estate value could be at stake due to these challenges.

As disasters like hurricanes, wildfires, and floods become more frequent and severe, insurance premiums are climbing. For many homeowners, especially those in high-risk areas, these higher costs may make it harder to afford their properties. This financial strain could lead to an increase in foreclosures. For real estate investors, understanding these trends is key to making informed decisions in an evolving market. :::