US Zombie Foreclosures Drop Sharply, ‘Little or No Impact’ on Housing Markets: Report

A foreclosure sign is posted in front of a home for sale in Stockton, Calif., on April 29, 2008. Justin Sullivan/Getty Images

The number of zombie foreclosures—properties abandoned by owners before foreclosure—has fallen by a fifth over the past year, according to real estate analytics company ATTOM.

There are 215,601 residential properties in the country currently engaged in the foreclosure process in the fourth quarter of this year, a decline of 32.8 percent from the same period last year, according to ATTOM’s Oct. 31 report. Among these properties, 7,100 are zombie foreclosures. This figure is down by 20.2 percent from a year ago.

“The latest count of zombie homes extends a long-term pattern of those properties representing only a tiny portion of the nation’s total housing stock,” the report states.

At present, only one out of every 14,591 homes in the United States is classified as a zombie property, one of the lowest levels in the past five years.

Zombie foreclosures can be problematic for a neighborhood since vacant homes may lower the value of properties in the area. The abandoned homes are not maintained, leading to overgrown lawns and an overall unkempt look that can bring down the appeal of a neighborhood.

Potential buyers could be put off from purchasing a home in a region where there are a large number of empty houses. This can create a chain effect in which the number of homes sold keeps falling and prices continue declining. Vacant homes can attract criminals as well, triggering safety concerns in the neighborhood and causing property values to decline further.

“Zombie foreclosures, which can attract vandals and spread neighborhood blight, continue to have little or no impact on most local housing markets,” the report noted.

Among states that had at least 50 zombie homes a year ago, Connecticut saw the biggest dip, with the number of such properties plunging by 87 percent. Iowa, North Carolina, New Mexico, and Oklahoma followed, with each of them registering a decline of more than 70 percent.

ATTOM CEO Rob Barber said that zombie properties “have gone from a plague in many areas of the U.S. following the Great Recession of the late 2000s, when millions of homes fell into foreclosure, to a distant memory in most communities today.”

Barber said that’s unlikely to change much in the near future given that “record home prices are keeping home-equity levels at historic highs,” the number of foreclosure cases is declining, and “the supply of homes is so tight that even when a property is abandoned, buyers are more likely to swoop in and pick it up.”

Although the number of zombie homes has declined, homeownership numbers continue to remain mostly steady. The homeownership rate in the country stood at 65.6 percent in the third quarter, according to a Nov. 1 report by Realtor.com. Since the fourth quarter of 2020, the rate has moved between a range of 65.4 and 66 percent.

“With housing inventory back to early 2020 levels, first-time homebuyers should have plenty of options, but they continue to face the challenges of affordability as listings prices have remained stubbornly high and mortgage rates have swung back up above 6.7 [percent],” the report said.

The inventory of properties for sale continues to remain lower than the 2019 pre-pandemic period. In October, there were more than 950,000 active listings across the country, which is below the roughly 1.23 million properties listed in July 2019, according to data from the Federal Reserve Bank of St. Louis.

Active listings consistently remained above the 1 million mark in 2019, a level that has not been breached since January 2020.

Vacant Properties

The ATTOM report also revealed that there were 1.355 million residential properties in the United States in the fourth quarter that were vacant, which translates to one in 77 homes. This was a marginal increase from the fourth quarter of 2023.

An Oct. 7 study by LendingTree estimated that more than 5.6 million housing units were vacant across the 50 largest metros in the country last year.

“Nearly half of all vacant units in the nation’s 50 largest metros sit empty because they’re waiting to be rented or they’re only used part of the year,” the study said.

New Orleans, Miami, and Tampa were the metros with the highest vacancy rates.

Some regions are taking action against vacant homes. In November 2022, voters in San Francisco approved a measure under which certain residential unit owners would be hit with taxes if the units were kept vacant for more than 182 days in a year.

The rule is set to come into effect in April 2025, with taxes potentially in the range of $2,500 to $5,000 per unit, depending on size, according to a January post by the nonprofit Pacific Research Institute (PRI). The taxes can jump to $20,000 in later years, it said.

PRI’s Steven Greenhut pointed out that the key reason for high vacancy rates in San Francisco was property owners being “afraid that once they let someone into their property, they’ll never get them out.”

He blamed this fear on the city’s “stringent rent controls, eviction restrictions and tenant protections—along with a Rent Board that almost always sides with tenants.”