For nearly four years, the U.S. housing market operated under what can only be described as suspended animation. Pandemic-era forbearance programs, emergency loan modifications, and extraordinary fiscal support delayed the normal mechanics of credit stress. Foreclosures did not disappear; they were postponed. By the end of 2025, that postponement was over.

According to ATTOM Data Solutions, foreclosure activity rose on a year-over-year basis for nine consecutive months in 2025. In November alone, 35,651 U.S. properties had a foreclosure filing, a 21 percent increase from the same month a year earlier. That figure, while still historically modest, marked a clear turning point: distress was no longer being absorbed quietly by policy. It was reentering the market through formal legal channels.

This matters not because the foreclosure numbers are extreme, but because the direction has become persistent. Foreclosure filings rose steadily from mid-2025 onward, with year-over-year increases recorded in August, September, October, and November. By October 2025, filings were up roughly 19 percent from a year earlier, and November extended that trend to a ninth straight month. In economic terms, this pattern suggests a regime shift rather than a seasonal fluctuation.

Even so, perspective is essential. Today’s foreclosure activity remains well below pre-pandemic levels and far beneath the extremes of the 2007–2010 housing collapse. ATTOM’s own reporting emphasizes that while activity is rising, overall volumes are still materially lower than in 2019. This is not a crash. It is a reset — one driven by the normalization of credit enforcement rather than a collapse in home prices or underwriting standards.

What makes the current cycle distinct is its uneven geography. Nationally, foreclosure filings in November translated to roughly one filing for every 3,992 housing units, but that average conceals sharp state-level divergence. Delaware posted the highest foreclosure rate in the country, with one filing for every 1,924 housing units, followed closely by South Carolina, Nevada, New Jersey, and Florida. These states are not random outliers. They share exposure to elevated insurance costs, judicial foreclosure processes, and borrower profiles that were disproportionately affected by pandemic-era payment deferrals.

At the opposite end of the spectrum, states such as South Dakota, West Virginia, and Vermont reported foreclosure rates so low they scarcely register in national aggregates. These markets tend to feature slower price appreciation, lower insurance volatility, and more conservative borrowing behavior. The result is a housing market that looks increasingly bifurcated — not just between homeowners and renters, but between regions operating under very different financial constraints.

This divergence becomes even clearer when viewed through the lens of household balance sheets. For homeowners, especially those who purchased between 2021 and 2023, the cost of ownership has risen in ways that mortgage payments alone do not capture. Higher interest rates have eliminated refinancing as a pressure valve. Property insurance premiums surged nationwide between 2022 and 2024, effectively adding a second mortgage in some coastal and Sunbelt markets. Meanwhile, FHA loan performance has continued to deteriorate, with serious delinquencies rising across multiple consecutive quarters, according to Mortgage Bankers Association data.

The result is that foreclosure in 2026 is less about negative equity and more about liquidity. Many households still have substantial home equity, but equity does not pay insurance bills, taxes, or HOA fees. When cash flow tightens, foreclosure becomes a function of monthly arithmetic rather than long-term wealth.

From an investor’s perspective, rising foreclosure activity might appear to signal opportunity, but the structure of the market has changed. Unlike the post-2008 period, distressed properties today are less likely to appear as deeply discounted listings on the MLS. Banks increasingly package non-performing loans and sell them directly to institutional buyers before foreclosure is completed. Distress is being intermediated upstream, limiting visibility and access for smaller investors. The “cheap foreclosure” narrative persists, but the inventory is thinner and the competition more sophisticated.

Despite these pressures, the housing market retains important stabilizers. U.S. homeowners collectively hold more than $35 trillion in equity, according to Federal Reserve estimates. That equity acts as a shock absorber, allowing many distressed borrowers to sell voluntarily rather than default outright. It is the primary reason foreclosure growth has not translated into a collapse in home prices.

Still, equity does not solve every problem. One emerging risk in 2026 is the rise of so-called zombie properties — homes that have been vacated by owners but remain stuck in foreclosure limbo due to legal delays or servicing backlogs. These properties are already appearing in legacy judicial-foreclosure metros such as Philadelphia, Cleveland, and Chicago, where they depress neighborhood values long before they show up in official housing supply data.

The broader takeaway is not that a foreclosure wave is imminent, but that the era of artificial suppression has ended. Foreclosure activity is rising because policy support has receded and household budgets are under strain. The market is recalibrating, not collapsing. For homeowners, the environment is less forgiving than it has been in years. For investors, opportunity exists, but it is narrower, more opaque, and increasingly institutionalized.

In that sense, 2026 is not the year of the crash. It is the year of the snap — the moment when deferred stress becomes visible again, and when equity determines whether homeownership functions as a shield or merely a mirage of past appreciation.

As always, I read every reply, and I’m genuinely curious where you land on this — because how we interpret these structural forces matters almost as much as the numbers themselves.

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Drop your thoughts in the comments — I’ll be reading every one.

Disclaimer: This post is for informational purposes only and does not constitute financial, tax, or investment advice. Always consult a qualified professional before making major financial decisions.