(Realtor.com) Cash-strapped home shoppers desperate for a deal might ponder buying a home in foreclosure. These homes, which lenders have repossessed due to owners defaulting on their mortgage, often sell for bargain prices.
Yet lately, these deals have been harder to find.
In 2010, following the 2008 financial crisis, there were more than 2.8 million foreclosures. This year, there were fewer than 358,000.
That’s thanks in large part to pandemic-related payment assistance programs like the Homeowner Assitance Fund, which provides grants to homeowners who are facing a COVID-19-related hardship. In 2021, a government-backed foreclosure moratorium saw foreclosures dipping as low as 151,153, or 0.3% of the national housing stock.
As those programs come to an end—the HAF is set to expire in 2026—there’s been a slight increase in the number of foreclosures. But all in all, foreclosed homes have become much more of a rarity of late.
And so have opportunities to buy them.
“While foreclosures were a source of bargains a decade and a half ago, inventory remains tight, so we don’t believe they will be any significant source of relief for homebuyers this year,” Realtor.com® senior economist Ralph McLaughlin says.
“Foreclosure rates remained well below pre-pandemic levels at the end of last year, and with an economy that is still adding jobs and homeowners saturated with equity,” he doesn’t anticipate much will change anytime soon.
Where to find foreclosures today
Although the number of homes in foreclosure is still far below pre-pandemic levels, there are four metropolitan areas where buyers are more likely to find them.
Both Syracuse, NY, and Allentown, PA, saw a 0.3% foreclosure rate last year—the highest in the country. Meanwhile, Buffalo, NY, and Honolulu were the only two cities to see higher rates of foreclosure than before the pandemic.
But is buying a foreclosure the right move?
“Most buyers are commonly real estate investors planning to rehab and resell/rent the property,” says Daniel Cabrera, owner and founder of Sell My House Fast SA TX. However, he also sees “first-time homebuyers looking for good deals in the real estate market.”
But Cabrera says foreclosure buyers have to have the “time, resources, and patience to attend to possible repairs and the more complicated purchasing process.”
The risks of buying a foreclosure
People often pursue foreclosed properties because they’re priced at below-market value. But Bruce Ailion, a real estate agent and attorney with Re/Max Town & Country in Atlanta, says “buyer beware” when it comes to foreclosed properties.
