{"id":170141,"date":"2024-04-03T10:35:51","date_gmt":"2024-04-03T16:35:51","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=170141"},"modified":"2024-04-20T07:19:41","modified_gmt":"2024-04-20T13:19:41","slug":"foreclosures-rising-and-commercial-delinquencies-increasing-q1-2024","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/foreclosures-rising-and-commercial-delinquencies-increasing-q1-2024","title":{"rendered":"Foreclosures Are Rising Quickly, and CRE Delinquencies Are Exploding\u2014What\u2019s Going On?"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm\/?e=BIGPOC8780315219\" width=\"100%\"><\/iframe>\r\n  \n\n\n\n\n<p><span data-preserver-spaces=\"true\">Home foreclosures are on the rise. Is this the start of a housing collapse and the buying bonanza for real estate investors touted for the last two years, or a mere blip?&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Foreclosure rates have steadily risen since interest rates increased in conjunction with the home&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.newsweek.com\/blue-states-housing-market-crisis-1877226\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">affordability crisis<\/span><\/a><span data-preserver-spaces=\"true\">.&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.redfin.com\/news\/share-of-homes-affordable-new-2023\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">According to Redfin<\/span><\/a><span data-preserver-spaces=\"true\">, only 15.5% of U.S. home listings were accessible financially to U.S. households in 2023. This has led to an 8% increase in foreclosure filings, according to a&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.attomdata.com\/news\/market-trends\/foreclosures\/u-s-foreclosure-activity-continues-to-see-an-annual-increase\/#:~:text=%E2%80%94%20March%2012%2C%202024%20%E2%80%94%20ATTOM,down%201%20percent%20from%20last\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">new report<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;by data company ATTOM.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The report says that certain states are seeing REO numbers that were not previously experienced since the housing crash of 2008. These states saw the highest annual increase in foreclosures in February 2024:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong><span data-preserver-spaces=\"true\">South Carolina:<\/span><\/strong><span data-preserver-spaces=\"true\">&nbsp;Up 51%<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Missouri:<\/span><\/strong><span data-preserver-spaces=\"true\">&nbsp;Up 50%<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Pennsylvania:<\/span><\/strong><span data-preserver-spaces=\"true\">&nbsp;Up 46%<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Texas:<\/span><\/strong><span data-preserver-spaces=\"true\">&nbsp;Up 7%<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Indiana:<\/span><\/strong><span data-preserver-spaces=\"true\">&nbsp;Up 0.8%<\/span><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Shifting Dynamics<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">&#8220;The annual uptick in U.S. foreclosure activity hints at shifting dynamics within the housing market,&#8221; said Rob Barber, CEO at ATTOM, in a press release about the report. &#8220;These trends could signify evolving financial landscapes for homeowners, prompting adjustments in market strategies and lending practices. We continue to closely monitor these trends to comprehend their complete effect on foreclosure activity.&#8221;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">That said, it&#8217;s probably not the start of a foreclosure landslide. The annual increase does not represent a widespread foreclosure epidemic, as other states appear more stable. In fact, there was a&nbsp;<\/span><em><span data-preserver-spaces=\"true\">decrease&nbsp;<\/span><\/em><span data-preserver-spaces=\"true\">in foreclosures annually in 28 states, hinting that the U.S. foreclosure situation is currently in flux, with employment a big factor.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">However, should high-interest rates persist and more adjustable-rate mortgages adjust upwards, we could see a greater increase in foreclosures, even in states with higher employment.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Cities Are Feeling the Pain<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Big cities are far from immune to foreclosures. Higher loan amounts, along with&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/ways-to-navigate-short-term-rental-laws\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">stricter short-term rental laws<\/span><\/a><span data-preserver-spaces=\"true\">, could be a contributing factor in seeing foreclosures in urban areas with populations greater than 200,000. Here are the numbers for five of them as of February 2024:&nbsp;<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong><span data-preserver-spaces=\"true\">New York City:<\/span><\/strong><span data-preserver-spaces=\"true\">&nbsp;1,367 foreclosure starts<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Houston:&nbsp;<\/span><\/strong><span data-preserver-spaces=\"true\">998 foreclosure starts<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Los Angeles:<\/span><\/strong><span data-preserver-spaces=\"true\">&nbsp;808 foreclosure starts<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Chicago:&nbsp;<\/span><\/strong><span data-preserver-spaces=\"true\">792 foreclosure starts<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Miami:&nbsp;<\/span><\/strong><span data-preserver-spaces=\"true\">777 foreclosure starts<\/span><\/li>\n<\/ul>\n\n\n\n<p><span data-preserver-spaces=\"true\">A probable reason for increased foreclosures is the market playing catch-up since the pandemic moratoriums, which allowed delinquent homeowners, many of whom lost their jobs in 2020, to stay in their homes temporarily. Although these restrictions were extended, they have since expired, causing owners to lose their homes.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">An Opportunity to Negotiate<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Though foreclosures are sporadic nationwide, the affordability crisis has meant a small buyer pool in some markets ready to purchase homes at retail prices. Despite this and the lack of inventory, banks have been unwilling to negotiate big discounts.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">However, &#8220;it&#8217;s worth noting that the rise in foreclosures could lead to an increased influx of distressed properties onto the market, which would create a buyer&#8217;s market with opportunities for those who are looking to invest in real estate,&#8221; Michael Branson, CEO of&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/reverse.mortgage\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">All Reverse Mortgage<\/span><\/a><span data-preserver-spaces=\"true\">, told&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/finance.yahoo.com\/news\/foreclosures-rising-experts-means-housing-180030618.html\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Yahoo! Finance.<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;&#8220;This could decrease prices or rental costs over time and provide a great opportunity for investors or people looking to purchase a home.&#8221;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Commercial Foreclosures: The Fire Sale Is On<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Well-publicized&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/how-you-can-buy-commercial-real-estate-in-2024\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">chaos in the commercial real estate market<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;has led to a spate of foreclosures, allowing cash-rich investors to scoop up multiple deals. As with single-family homes, commercial lenders offered underwater investors extensions and modifications on empty office buildings, apartment complexes, and hotels in need of repair, crippled by increased construction costs and supply chain problems.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Now, their patience has worn out. Soaring interest rates have meant that investors with floating-rate debt cannot make payments, and savvy buyers who sat out the pandemic waiting for an opportunity like this will pounce.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">&#8220;We&#8217;re in a period of time where it&#8217;s great to have dry powder,&#8221; Rich Banjo, co-president of Artemis Real Estate Partners, which buys distressed properties through a $2.2 billion fund it closed last year, told the&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.wsj.com\/real-estate\/cash-flush-buyers-dip-into-distressed-commercial-real-estate-13724a94\" target=\"_blank\" rel=\"noopener\"><em><span data-preserver-spaces=\"true\">Wall Street Journal<\/span><\/em><\/a><em><span data-preserver-spaces=\"true\">.<\/span><\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Cash-Rich Investors Are Cleaning Up<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">The same&nbsp;<\/span><em><span data-preserver-spaces=\"true\">WSJ&nbsp;<\/span><\/em><span data-preserver-spaces=\"true\">article states that global real estate funds operated by private equity firms were sitting on $544 billion in cash as of the second quarter of last year\u2014a record level, and up from $457 billion at the end of 2022, according to data firm&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.preqin.com\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Preqin<\/span><\/a><span data-preserver-spaces=\"true\">, with the majority of money dedicated to finding distressed real estate.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Norfolk, Virginia-based Harbor Group International spent more than $600 million over the past year on seven apartment building developments\u2014including Pine Ridge and Locklyn West Palm, both in West Palm Beach, Florida, struggling to attract tenants. With $2.2 trillion in commercial mortgages scheduled to mature between now and the end of 2027, according to data firm Trepp, Harbor&#8217;s buying bonanza could be the start of a commercial real estate feeding frenzy.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Small investors could also benefit by joining forces and syndicating smaller apartment building deals that struggle with the same financial headwinds as the bigger players.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Final Thoughts<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Without the tailwind of interest rates coming down, expect to see more foreclosures in the single-family home market and&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/commercial-real-estate-fundamentals\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">commercial real estate<\/span><\/a><span data-preserver-spaces=\"true\">\u2014both office and residential. A generally robust economy and low unemployment have allowed the Federal Reserve to hold the line for now with interest rates to stave off inflation.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">In commercial real estate, the dam has already sprung a leak and threatens to burst entirely. Single-family and small&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/finding-multifamily-properties\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">multifamily<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;real estate are under quite the same threat, but as we have seen, without jobs matching interest rates,&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/2006-09-01-how-to-find-foreclosure-and-pre-foreclosure-listings\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">foreclosures<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;will continue to rise. It&#8217;s times like this when&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/finding-multifamily-properties\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">syndicators<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;and deep-pocketed investors make their fortunes.<\/span><\/p>\n\n\n\n<div class=\"wp-block-group has-slate-200-background-color has-background\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n<h2 class=\"wp-block-heading has-text-align-center has-theme-slate-dark-color has-text-color\"><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-theme-blue-color\">Exclusive Breakdown and Data Analysis of the Hottest Region for Investors<\/mark> <\/h2>\n\n\n\n<div class=\"wp-block-media-text has-media-on-the-right is-stacked-on-mobile is-vertically-aligned-center\" style=\"grid-template-columns:auto 34%\"><div class=\"wp-block-media-text__content\">\n<p>It&#8217;s no secret the Sunbelt has been a primary focus of investors for years due to appreciation and rent growth. But which markets offer the best opportunities for cash flow?<\/p>\n\n\n\n<p>Download our <strong>Sunbelt Market worksheet<\/strong> for a synopsis of the most popular metros and states for investors, and get the <strong>full data for all states and markets<\/strong> in our accompanying Sunbelt Market Intel spreadsheet.<\/p>\n\n\n\n<div x-data=\"frictionlessSignupForm()\" class=\"button-account-type alignleft\">\n\n  \n\n  <!-- Guest Button -->\n      <template x-if=\"!$store.wp.isMember()\">              <button x-on:click=\"$store.wp.displaySignupPrompt()\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\">Sign Up to Download<\/button>\n          <\/template>  \n  <!-- Free Member Button -->\n      <template x-if=\"$store.wp.isMember() &#038;&#038; !$store.wp.isPaidMember()\">              <a href=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/04\/Sunbelt-Markets.zip\" target=\"_blank\" x-on:click=\"window.analytics.track(&#039;Blog | Market Intelligence | Sunbelt&#039;, {\n            referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/foreclosures-rising-and-commercial-delinquencies-increasing-q1-2024&#039;,\n            account_type: &#039;free&#039;,\n          });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\">Download the Data Worksheet<\/a>\n          <\/template>  \n  <!-- Pro Member Button -->\n      <template x-if=\"$store.wp.isPaidMember()\">      <a href=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/04\/Sunbelt-Markets.zip\" target=\"_blank\" x-on:click=\"window.analytics.track(&#039;Blog | Market Intelligence | Sunbelt&#039;, {\n          referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/foreclosures-rising-and-commercial-delinquencies-increasing-q1-2024&#039;,\n          account_type: &#039;pro&#039;,\n        });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\">Download the Data Worksheet<\/a>\n    <\/template>  \n  <!-- Frictionless Popup -->\n  <\/div>\n<\/div><figure class=\"wp-block-media-text__media\"><img loading=\"lazy\" decoding=\"async\" width=\"1000\" height=\"1000\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/04\/MI-April24_Blog-Thumbnail.jpg\" alt=\"sunbelt markets market intelligence\" class=\"wp-image-170016 size-full\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/04\/MI-April24_Blog-Thumbnail.jpg 1000w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/04\/MI-April24_Blog-Thumbnail-300x300.jpg 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/04\/MI-April24_Blog-Thumbnail-150x150.jpg 150w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/04\/MI-April24_Blog-Thumbnail-768x768.jpg 768w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/04\/MI-April24_Blog-Thumbnail-200x200.jpg 200w\" sizes=\"auto, (max-width: 1000px) 100vw, 1000px\" \/><\/figure><\/div>\n<\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Some states are seeing their highest REO increases since the 2008 recession. South Carolina saw a 51% increase, while cities like New York saw their totals increase in the commercial space. What does this mean for the housing market?<\/p>\n","protected":false},"author":613725,"featured_media":170143,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[8,7119],"tags":[],"class_list":["post-170141","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-trends","category-biggerpockets-daily"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/170141","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/613725"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=170141"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/170141\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/170143"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=170141"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=170141"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=170141"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}