Despite all the protections against foreclosure and other COVID-19 related relief measures for homeowners, it appears that foreclosures have actually been on the rise in recent weeks. According to a new report from ATTOM Data Solutions, foreclosures jumped 16% between January and February, and in 29 states they are trending up.
If you are a domestic palm Where rental property investorThis may seem like a silver lining, especially if distressed properties are your typical purchase. But is that really a reason to be optimistic at the moment? Let’s dive in.
What the data says
Foreclosures are definitely on the rise. In February, one in 12,182 properties was foreclosed, up 16% from January. In addition, seizures made increased by 8%.
Foreclosure starts have also increased in more than half of the US states, with the highest foreclosure rates in Utah, Delaware, Florida, Illinois and Louisiana. (Utah saw one in 3,883 housing units seized last month.)
The news is probably startling, with the moratoriums on foreclosures, mortgage forbearance, and other pandemic relief efforts still in place. But according to Rick Sharga – executive vice president of RealtyTrac – not all properties are subject to these measures.
“The government moratorium prohibits foreclosures on government guaranteed loans for homeowners, and forbearance program borrowers are also protected from foreclosure measures,” Sharga said. “But the loans on commercial properties, investment properties and vacant and abandoned properties do not always benefit from the same protections. Perhaps that is why we are seeing a slight increase in foreclosure starts despite government programs. “
Reasons for caution
If you typically look to distressed properties to expand your investment portfolio, the uptrend probably gives you hope. But don’t get too excited just yet.
The increases noted by ATTOM are only monthly, and when you look at the data over the year, seizures are still down significantly from their pre-pandemic days.
Between February 2019 and February 2020, seizures fell by 77% and completed seizures fell by 85%.
This means that while foreclosures may have an upward trend, it does not necessarily indicate that distressed properties will be widely available shortly. Until the moratoriums and other COVID-19 protections expire, the supply of these properties will likely remain low.
To top it off, the few properties that hit the market will see high demand. According to recent data from Auction.com, foreclosures are currently sell at their highest price-to-market ratio since January 2014, and offers by property? They are at an all time high.
What you can do
If you are looking for these properties your best bet is a online auction application, which allows you to bid on properties across the country, no matter where you are located. You should also opt for cash offers when you can, or, if that is not possible, have a pre-approval in hand before submitting your offer. You can also try these five alternative options to invest.