In the realm of real estate, the term “zombie” carries a vastly different, yet equally eerie, connotation than its pop culture counterpart. Unlike the hordes of undead we see shambling across our screens in shows like The Walking Dead, “zombie foreclosures” refer to homes that have been abandoned by their owners, often without knowledge of their legal responsibility, while the foreclosure process is still underway. These properties, left vacant and neglected, can become eyesores, diminish neighborhood appeal, and complicate the already intricate landscape of the housing market. Fortunately, a recent report indicates that the United States is far from being overrun by these real estate “undead.”
The latest fourth-quarter Vacant Property and Zombie Foreclosure Report from ATTOM, a leading curator of real estate data, offers a crucial glimpse into the health of the nation’s housing market. Released earlier this week, the report provides a comprehensive analysis of vacant residential properties and those ensnared in the foreclosure pipeline. The findings serve as a reassuring indicator of the housing market’s resilience, despite a slight uptick in certain foreclosure metrics.
Understanding the Landscape of Vacant Properties
According to ATTOM’s meticulous data collection, a significant number of residential properties across the U.S. currently sit vacant. The report identified 1,264,241 such properties in the fourth quarter of 2022, representing approximately 1 in every 79 homes nationwide. While this figure might seem substantial, it’s essential to contextualize it within the broader housing market. Vacancy rates are influenced by various factors, including seasonal trends, investor activity, and the pace of new construction. A certain level of vacancy is normal in any dynamic real estate market, reflecting homes in transition between owners or tenants. However, when combined with an ongoing foreclosure process, these vacant homes can become problematic “zombie” properties.
The report doesn’t just stop at vacant homes; it delves into the more critical category of properties currently undergoing foreclosure. In Q4 2022, a total of 284,423 residential properties were in the process of foreclosure. This figure marks an increase of 5.2 percent from the third quarter of 2022 and a more significant jump of 27.4 percent compared to the fourth quarter of 2021. This rise in foreclosure activity, while noticeable, has been anticipated by many market analysts. It largely reflects the unwinding of pandemic-era foreclosure moratoriums and homeowner assistance programs, which temporarily paused many default proceedings. As these protections expire, a natural rebound in foreclosure filings is occurring, though it remains far below the peak levels observed during the 2008 financial crisis.
The Rise of Zombie Foreclosures: A Closer Look
Within the broader category of properties in foreclosure, “zombie foreclosures” represent a specific subset that warrants particular attention. These are homes where the owner has already vacated the property, often due to financial distress, even though the legal foreclosure process has not yet been completed by the lender. They stand empty, often deteriorating, and can become magnets for vandalism or neglect, negatively impacting surrounding property values and community aesthetics. The ATTOM report identified 7,722 such zombie foreclosures in the fourth quarter of 2022.
While this number represents a slight increase of 0.2 percent from the third quarter and a 3.9 percent rise compared to Q4 of 2021, it remains remarkably low in historical context. This modest increase in zombie properties, though notable, does not signal a widespread crisis. Instead, it reflects the underlying strength and resilience of the current housing market. A low number of zombie foreclosures is a positive indicator, suggesting that most homeowners facing financial difficulties are either able to sell their properties before foreclosure or stay in their homes during the process, preventing abandonment.
Regional Snapshots: Texas and Dallas-Fort Worth-Arlington
The national statistics, while informative, often mask regional variations. ATTOM’s report provides granular data, allowing for a localized understanding of the foreclosure landscape. In the dynamic Dallas-Fort Worth-Arlington metropolitan area, for instance, the situation regarding zombie foreclosures is particularly benign. The report showed only 13 pre-foreclosure, or zombie, properties in Q4 of 2022, translating to an exceptionally low rate of 0.88 percent. This robust performance underscores the economic vitality and strong housing demand characteristic of the DFW metroplex.
Zooming out to the state level, Texas also exhibited a relatively stable foreclosure environment. The state recorded 114 pre-foreclosure properties in the fourth quarter, a slight decrease of eight properties compared to the third quarter. The Q4 rate for Texas stood at 1.8 percent, a modest improvement from the 2.34 percent recorded in the previous quarter. Further breaking down the data by county within the DFW area, Dallas County had six zombie properties, Tarrant County five, and Collin County reported zero, highlighting the diverse conditions even within a single metropolitan region. Areas with strong job growth, high demand, and limited inventory, like Collin County, are naturally less susceptible to widespread property abandonment.
Behind the Numbers: ATTOM’s Methodology
The accuracy and depth of ATTOM’s report stem from its robust analytical methodology. The company meticulously analyzes publicly recorded real estate data, a comprehensive dataset that includes crucial information such as foreclosure status, equity levels, and owner-occupancy status. This rich data is then cross-referenced and matched against monthly updated vacancy data, allowing ATTOM to identify properties that are both vacant and in the pre-foreclosure stage – the very definition of a zombie foreclosure. This rigorous approach ensures that the insights provided are not only timely but also highly reliable, offering a clear picture of market trends that directly impact homeowners, investors, and policymakers.
It’s true that the count of zombie properties has seen a slight increase in each of the past three quarters. This incremental rise might evoke images of the relentless, albeit slow, spread of the undead in fictional narratives. However, in the context of real estate, this trend reflects a market that has largely recovered from past crises and is currently operating on solid ground. The numbers, though increasing, remain incredibly small relative to the total number of residential properties in the U.S., signaling that the housing market is far from being overwhelmed by abandoned homes. This resilience is a testament to strong underlying fundamentals that have characterized the market for over a decade.
A Decade of Housing Market Strength
The current low incidence of zombie foreclosures is a direct reflection of an extended period of housing market strength. The past 11 years have witnessed nearly uninterrupted gains across various housing metrics. Since 2012, median home values nationwide have more than doubled, providing homeowners with substantial wealth accumulation. Concurrently, home-seller profits have surged by over 50 percent, creating a significant buffer for those who might face financial difficulties. The vast majority of homeowners today boast considerable equity built up in their homes, which acts as a powerful deterrent against foreclosure. When a homeowner has substantial equity, they are far more likely to sell their property on the open market, often at a profit, rather than letting it fall into foreclosure and become a zombie property.
“Low vacancy rates are also a major factor in there being few zombie homes,” stated Rick Sharga, Executive Vice President of Market Intelligence at ATTOM, in the report. His insights underscore a critical dynamic in the housing market: strong demand coupled with limited supply. With an ongoing robust appetite from both traditional homebuyers and investors, the inventory of homes available for sale remains historically low. This scarcity means that properties, even those entering the foreclosure process, are often quickly absorbed by the market before they can sit vacant for extended periods and become “zombies.”
Sharga elaborated, “And with demand from both traditional homebuyers and investors still relatively strong, and the inventory of homes for sale still very low, vacancy rates for residential homes is about as low as it’s ever been.” This confluence of factors creates a market environment where properties are highly coveted. Even if a homeowner defaults, the high demand ensures that the property is unlikely to remain abandoned, either being purchased at auction or through a short sale. This active market velocity prevents properties from languishing in a state of limbo, thereby keeping the number of zombie foreclosures remarkably in check.
Outlook: A Resilient Market Despite Headwinds
While the housing market has demonstrated remarkable resilience, it is not immune to broader economic shifts. Rising interest rates, persistent inflation, and concerns about a potential economic slowdown could introduce new dynamics in the coming quarters. These factors might temper demand, cool home price appreciation, and potentially lead to a further increase in foreclosure filings. However, the strong foundation of home equity, coupled with historically low vacancy rates and persistent buyer interest, suggests that the market is well-equipped to navigate these challenges.
In conclusion, while the term “zombie foreclosure” may evoke images of a dystopian housing market, the reality presented by ATTOM’s latest report is far more reassuring. The modest increase in zombie properties is a footnote in a larger narrative of market strength, characterized by robust home equity, significant home value appreciation, and extremely low vacancy rates. The housing market, it seems, is not only alive but thriving, successfully fending off any widespread “zombie apocalypse” for the foreseeable future. This stability offers a sense of confidence for both homeowners and potential buyers, reaffirming the enduring value of real estate as a cornerstone of wealth and community well-being.