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The number of vacant “zombie” properties increased in the second quarter as foreclosure activity increased across the country. About 1.3 million residential properties sit vacant in the U.S., according to ATTOM Data Solutions’ 2022 Vacant Property and Zombie Foreclosure Report. Zombie properties have been abandoned by their owners while they linger in the foreclosure process.
Zombie foreclosures were up 3% in the second quarter compared to the first quarter, following the first foreclosure gains in a year, the report notes.
The percentage of properties in the foreclosure process during the second quarter is up 12.7% compared to the first quarter and is up nearly 16% compared to a year earlier, according to ATTOM Data Solutions. Foreclosures were mostly at a standstill during the onset of the pandemic as moratoriums were in place. As pandemic measures have lifted, the number of foreclosures has risen.
“The incidence of zombie foreclosures tends to be higher in cases where the foreclosure process has dragged on for many months and sometimes even for years,” says Rick Sharga, executive vice president of market intelligence at ATTOM Data Solutions. “We’re now seeing properties where the borrower was already in default prior to the government’s moratorium reenter the foreclosure process, and undoubtedly some of these homes will have been vacated over the past 26 months.”
Despite the recent quarterly uptick, zombie foreclosures are down 6.3% compared to a year ago. They make up a small segment of the nation’s total housing stock. Still, the recent increase in zombie properties is the first since foreclosure moratoriums have ended, ATTOM Data Solutions reports. “The upward second-quarter foreclosure trends—in both overall and zombie-property counts—add to a list of measures showing how the decade-long U.S. housing market boom remains strong but also faces a possible slowdown this year,” ATTOM Data researchers share in the report.
Nearly 90% of homeowners in foreclosures do have positive equity, Sharga adds. “Having equity gives financially distressed homeowners an opportunity for a relatively soft landing—selling their home at a profit rather than losing everything to a foreclosure,” he notes. “That factor alone should keep the number of zombie foreclosures from rising too much.”