{"id":188389,"date":"2026-06-26T12:06:25","date_gmt":"2026-06-26T18:06:25","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=188389"},"modified":"2026-06-26T12:06:28","modified_gmt":"2026-06-26T18:06:28","slug":"mortgage-defaults-and-foreclosures-are-surging-in-key-markets","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/mortgage-defaults-and-foreclosures-are-surging-in-key-markets","title":{"rendered":"Mortgage Defaults and Foreclosures Are Surging in Key Markets: What Investors Need to Know"},"content":{"rendered":"

Foreclosures are way up. According to <\/span>HousingWire<\/span><\/a>, they rose 14% year over year in May, while analytics and data site <\/span>ATTOM<\/span><\/a> reports a 26% jump in the first quarter compared to last year. That\u2019s not a<\/span> blip or a temporary correction but enough of a jump for investors to take note and strategize around it.<\/span><\/p>\n

States Differ Markedly<\/span><\/h2>\n

Despite the knee-jerk reaction to proclaim an impending 2008-style financial crash, the first thing to note is that the rise in foreclosures is markedly different from state to state. <\/span>ATTOM<\/span><\/a> notes that the states most affected by the rise in defaults are Florida, South Carolina, Maryland, Nevada, and Indiana.<\/span><\/p>\n

The<\/span> Wall Street Journal<\/span><\/a><\/em> points out that bad loans to unqualified buyers are not a primary driver of the spike but rather rapidly rising insurance and <\/span>property tax<\/span><\/a> costs. That\u2019s a crucial difference because lending practices can be tightened with requirements for higher <\/span>credit scores<\/span><\/a> and increased <\/span>down payments<\/span><\/a>, but lowering insurance costs and property taxes is not as easily accomplished, which could hint at more foreclosures to come.<\/span><\/p>\n

\u201cPayment Shocks From Taxes and Insurance\u201d<\/span><\/h2>\n

\u201cThey\u2019re having payment shocks from taxes and insurance\u2026along with potential job distress,\u201d Marina Walsh, an economist at the Mortgage Bankers Association, told the <\/span>Journal<\/span><\/em>. For recent buyers, \u201cit\u2019s this layering effect that could create distress.\u201d<\/span><\/p>\n

Employment is also playing a big role. According to ATTOM\u2019s Q1 findings, the riskiest markets were those with the highest unemployment rates.<\/span><\/p>\n

“While home prices have eased slightly from last summer’s record highs, affordability remains a challenge in much of the country,” Rob Barber, CEO of ATTOM,<\/span> said in a statement<\/span><\/a>. “The greatest risk remains in counties where unemployment rates are above 5%, and homes are <\/span>being foreclosed<\/span> at greater rates.\u201d<\/span><\/p>\n

How Real Estate Investors Should Interpret the Data<\/span><\/h2>\n

Simply buying in areas with the highest foreclosure rates might not be a prudent move for investors, depending on your long-term goals. For <\/span>flippers<\/span><\/a>, buying in a market with high unemployment, taxes, or insurance costs may mean <\/span>not being able to<\/span> find a qualified end buyer. For landlords, a positive cash flow analysis may not be worth much if there is a low catchment of employed tenants.<\/span><\/p>\n

Equally, each state needs to <\/span>be taken<\/span> in context. According to <\/span>ATTOM<\/span><\/a>, the state with the worst foreclosure rate in April was Delaware, with 1 in every 1,739 housing units showing a filing.<\/span><\/p>\n

However, if you\u2019re looking for cash flow, this is not the place to find a deal. The median listing price here is $500,000, which, with today\u2019s interest rates, is a nonstarter, even with a modest discount on a short sale. And finding a foreclosure might not be as easy as you\u2019d expect.<\/span><\/p>\n

\u201cA Math Problem\u201d<\/span><\/h2>\n

Hannah Jones, senior economic research analyst at Realtor.com, said in the Realtor.com report:<\/span><\/p>\n

“Delaware’s high foreclosure rate is partly a math problem. With a relatively small number of total housing units, it doesn’t take many filings to produce an alarming per-unit figure, so the rate overstates how dire conditions are for the average Delaware homeowner compared to a larger state with far more absolute filings.\u201d<\/span><\/em><\/p>\n

Also contributing to the Delaware foreclosure rate was a spike in property taxes. “Delaware recently completed its first comprehensive property tax reassessment in roughly 40 years, and many homeowners saw their tax bills jump, which pushed some over the financial edge,\u201d Jones said, which again would kill cash flow for potential landlords.<\/span><\/p>\n

Why South Carolina\u2019s Data Could Be Misleading<\/span><\/h2>\n

Other states, such as South Carolina, which saw 1 in every 1,745 properties <\/span>showing a filing<\/span>, <\/span>have<\/span> a different problem.<\/span> They have <\/span>simply<\/span> grown too big, too fast, driving up prices and creating affordability issues for some <\/span>local<\/span> residents.<\/span><\/p>\n

Jones explains:<\/span><\/p>\n

“South Carolina’s foreclosure pressure is largely a consequence of its own growth. Rapid in-migration drove home prices well beyond what local income levels could support, and many buyers who purchased near the peak of that appreciation, with elevated mortgage rates on top, are now left with high monthly payments and little <\/span>equity<\/span><\/a> cushion. When financial stress hits, those homeowners have limited ability to <\/span>refinance<\/span><\/a> or sell their way out.\u201d<\/span><\/em><\/p>\n

Demand for South Carolina Markets Is at a High Point<\/span><\/h2>\n

For potential flippers, this could be a scenario that works if <\/span>houses can be purchased<\/span> at a discount. Demand for the Palmetto State is at an all-time high, with recent <\/span>Census Bureau data<\/span><\/a> showing it as the fastest-growing state by population in the country.<\/span><\/p>\n

Compared to other states, South Carolina\u2019s main markets of Myrtle Beach, Charleston, Columbia, and Greenville tick many of the boxes both flippers and landlords are looking for:<\/span> employment<\/span><\/a>,<\/span> affordability<\/span><\/a>, and<\/span> high demand<\/span><\/a>. In November,<\/span> Realtor.com<\/span><\/a> ranked South Carolina among the top-performing housing markets in the country.<\/span><\/p>\n

\u201cNew builds continue to become more available and more affordable to the American homebuyer despite subdued single-family construction trends,\u201d Realtor.com senior economist Joel Berner said. \u201cSouthern markets like South Carolina are proving that steady building <\/span>pipelines<\/span> can preserve affordability even as demand grows.\u201d<\/span><\/p>\n

Thus, South Carolina\u2019s status as a high-foreclosure state can be misleading for investors looking to lean into the recent foreclosure data; towns and cities in this state have homes that should automatically fall into the buy box.<\/span><\/p>\n

Underwrite Carefully and Make Shrewd Offers<\/span><\/h2>\n

Before reviewing all the additional information on in-migration, employment, and median incomes, potential landlords should carefully underwrite using today\u2019s actual borrowing, insurance, and tax costs.<\/span><\/p>\n

If cash flow goes into the red, it\u2019s a nonstarter, regardless of everything else. The longer the house has been in foreclosure, the lower the offer should be. There\u2019s no harm in starting low, but banks are usually a little delusional to begin with. After a few months of tax, utility, and maintenance payments, they\u2019re ready to cut their losses.<\/span><\/p>\n

This<\/span> is where an all-cash offer and a fast close win the day. If you don\u2019t have cash, private money, or a short-term bridge loan to secure the property until you can make repairs and refinance, you can get a deeply discounted deal that cash flows from day one or that you can place back on the market with a decent profit attached.<\/span><\/p>\n

This<\/span> is important for flippers. You\u2019ll have to create your own equity because relying on rapid appreciation won\u2019t work in today\u2019s market, where home prices, barring a few outlying markets, are hardly moving.<\/span><\/p>\n

Final Thoughts: Short- and Long-Term Paths<\/span><\/h2>\n

It\u2019s impossible to predict what will happen long term regarding interest rates, incomes, and the economy, so buying deals that make sense in the short term and could <\/span>be held<\/span> long term is the way to go.<\/span><\/p>\n

Should insurance, taxes, and maintenance costs continue to rise, <\/span>it\u2019s likely that more foreclosures will<\/span> come to market, offering more buying opportunities. What\u2019s crucial is being able to buy when the right deal comes along\u2014being financially prepared, either with a loan or cash, to survive a lengthy renovation or a slower sale.<\/span><\/p>\n

Cash flowing from day one, if you are not paying all cash or putting down a large down payment at current rates, could be hard, so having the reserves on hand to withstand the ups and downs of being a landlord, praying for a brighter day regarding interest rates, is essential.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Foreclosures are way up. According to HousingWire, they rose 14% year over year in May, while analytics and data site ATTOM reports a 26% jump in the first quarter compared […]<\/p>\n","protected":false},"author":613725,"featured_media":185039,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[8],"tags":[],"class_list":["post-188389","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-trends"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/188389","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=188389"}],"version-history":[{"count":2,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/188389\/revisions"}],"predecessor-version":[{"id":188391,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/188389\/revisions\/188391"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/185039"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=188389"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=188389"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=188389"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}