Zombies Be Gone! New Report Shows Positive Real Estate Trend

During the Great Financial Crisis, zombie foreclosures spiked, causing neighborhood blight and decimating home values. Some have worried that if another real estate bubble occurs, we could find ourselves in a similar spot. A zombie foreclosure refers to a situation where a homeowner has abandoned their property after receiving a foreclosure notice, but the lender never completed the foreclosure process. The homeowner still owns the property, which remains vacant and unsellable, hence the term "zombie." 

Like in horror movies, while a single zombie can be vanquished, dealing with a large number of zombie foreclosures presents a different challenge. Fortunately, the latest data from Attom shows that we aren’t in zombie danger right now. The company found that abandoned homes in foreclosure have dropped by 20% year over year, and only one in 14,000 homes is empty in foreclosure. 

Trending Now:

• This billion-dollar fund has invested in the next big real estate boom, here's how you can join for $10.
  This is a paid advertisement. Carefully consider the investment objectives, risks, charges and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the Fund's prospectus. Read them carefully before investing.
• A billion-dollar investment strategy with minimums as low as $10 — you can become part of the next big real estate boom today.
  This is a paid advertisement. Carefully consider the investment objectives, risks, charges and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the Fund's prospectus. Read them carefully before investing.

The report shows that 1.4 million residential properties in the United States are vacant, representing around one in 76 homes. The overall foreclosure rate is down 6% from the previous quarter and down over 29% from last year, revealing a solid positive trend. 

The trend is a welcome change from last year when the zombie foreclosure rate rose. Last year, it was up 15.3%. While that was only one in 11,412 homes, it was enough to cause concern that more weakness could be coming. Instead, what may have been happening is the fallout from the increase in foreclosures after the pandemic-driven foreclosure moratoriums expired.

As Rob Barber, CEO of Attom, pointed out, one thing that makes this cycle different is that owners have a much higher level of equity in their homes. This gives them options if they are facing financial hardship. "One significant factor is the historically high levels of home equity," said Barber. "This provides homeowners who may be struggling with their mortgage payments a strong incentive to negotiate new payment plans, which in turn reduces the number of foreclosures. As a result, fewer owners are simply walking away from their properties like so many did after the Great Recession of the late 2000s."

Read More:

• Don’t miss out on the next NVIDIA – you can invest in the future of AI for only $10.
  **This is a paid advertisement. Carefully consider the investment objectives, risks, charges and expenses of the Fundrise Innovation Fund before investing. This and other information can be found in the Fund's prospectus. Read them carefully before investing.
• When today’s AI startups go public, most of the rapid growth will be behind them — here’s how not to get left out.
  This is a paid advertisement. Carefully consider the investment objectives, risks, charges and expenses of the Fundrise Innovation Fund before investing. This and other information can be found in the Fund's prospectus. Read them carefully before investing.
• Don’t miss the real AI boom – here’s how to use just $10 to invest in high growth private tech companies.
  This is a paid advertisement. Carefully consider the investment objectives, risks, charges and expenses of the Fundrise Innovation Fund before investing. This and other information can be found in the Fund's prospectus. Read them carefully before investing.

Where Zombies And Foreclosures Could Emerge

One place to watch for zombies is Florida. Zombie properties in Florida have increased by 64%, from 1,199 to 1,961 properties, indicating a potential trend that bears monitoring. This is still a relatively small number, but it reflects an overall weakening of the real estate market in certain parts of the state. In July, Attom reported that Florida was second in the nation in foreclosure starts. Prices are also stabilizing in Florida and even dropping in some areas as inventory ticks up. The latest report from Florida Realtors found that there is a 4.6-month supply of single-family inventory, and condo-townhouse inventory reached a 7.4-month supply.

That inventory supply bears watching because a new report from Redfin showed that the median monthly homeowners association (HOA) fees are rising in many Florida markets. In Tampa, they were up 17.2%, and in Orlando, they increased by 16.7%. Redfin analyzed condo/co-op HOA dues and sale prices on MLS listings in 43 areas and found an average 5.7% increase across all metros. Higher insurance prices are the culprit behind the HOA increases. These higher fees are starting to pull on condo prices throughout the state. "Condos are really taking a hit. Prices are hurting," said Eric Auciello, a Redfin sales manager in Tampa. "Condo fees are skyrocketing due to increased insurance costs. These additional fees have adversely affected the value of many units."

Florida's problems are still relatively minor, and the state still sees an influx of residents across many cities. As Realtor.com put it, the state is a tale of two real estate markets, with coastal condominiums seeing prices drop while prices are holding steady in inland locations.