As real estate investors, we have been spoiled with almost a unlimited pipeline over the past decade of decent acquisition opportunities. Most of these homes were bank owned and have suffered from neglect throughout the foreclosure process. Easy fix-and-flip candidates as well as fix-rent properties seemed to be prevalent in many areas. These opportunities have been steadily diminishing and in many areas have almost completely dried up. Where have all of the foreclosures gone?
Recent Studies Explain
A recent report from ATTOM Data Solutions substantiates these suspicions. The report measures quarterly foreclosure activity and shows that foreclosures are at a 13-year low point, the lowest since Q4 of 2005. Foreclosure activity has been lower than pre-recession levels for almost two-years now.
Some interesting facts from the ATTOM Data Solutions report:
- 177,146 properties in the US had foreclosure filings in Q3 2018 (down 8% from last year)
- Banks repossessed through REO processes 51,459 properties in Q3 2018 and it took an average of 713 days to complete the process
- Timelines to complete the foreclosure process are now at a two-year low
- 15 states showed year-over-year increases in foreclosure activity (including Florida, Texas, Maryland, Michigan and Missouri)
- 79 metropolitan areas also showed year-over-year increases in foreclosure activity (including Los Angeles, Houston, Miami and Detroit)
- FHA mortgages that were created in 2014 have a higher foreclosure rate than the average FHA foreclosure rate
- The biggest new risks for increased foreclosure activity are in areas recently impacted by natural disasters such as hurricanes
What does the future hold?
With a reduction in the number of foreclosure filings, investors will continue to have a reduction in foreclosure properties available. This opportunity reduction combined with the increase in home prices (7.6% year-over-year in September 2018 according to a Zillow report), will likely have some investors seeking alternate strategies. It’s important to remember that all markets are unique and some will present opportunities outside of these trends. Evaluate your market areas statistics carefully before making significant acquisitions in one location.