Zombie Foreclosures Surge: A Growing Threat to America’s Housing Market

Across the United States, a troubling trend is emerging in the housing market: zombie foreclosures—homes abandoned by owners during the foreclosure process—are on the rise. According to a recent report from ATTOM, a real estate analytics firm, 7,329 pre-foreclosure properties were classified as “zombie” homes in the second quarter of 2025, representing 3.3% of all homes in foreclosure. This marks a slight increase from 2.9% in the same period last year and reflects a growing challenge in the housing sector. With foreclosure activity climbing and economic pressures mounting, these abandoned properties are becoming a symbol of distress in neighborhoods nationwide. Which states are bearing the brunt of this crisis, and what does it mean for homeowners and communities? What Are Zombie Foreclosures?Zombie foreclosures occur when homeowners, facing foreclosure, abandon their properties before the process is complete, leaving homes vacant and often neglected. These properties, marked by overgrown lawns and peeling paint, can drag down neighborhood aesthetics and property values. As Jiayi Xu, an economist at Realtor.com, explains, homeowners in low-equity areas may walk away rather than negotiate payment plans, while lenders sometimes halt foreclosures if the cost of maintaining and reselling the home outweighs its value. The result? Homes sit empty, becoming magnets for vandalism and decay, further destabilizing communities.ATTOM’s data reveals that more than 212,000 homes were in some stage of foreclosure in Q1 2025, with 7,094 classified as zombie foreclosures. While these represent a small fraction of the housing market, their impact is significant, particularly in certain regions where economic and environmental factors are driving defaults.The Hardest-Hit StatesThe South and Midwest are seeing the sharpest spikes in zombie foreclosures. ATTOM’s report highlights five states with the largest annual increases in these vacant properties in Q1 2025, each with at least 50 zombie foreclosures:

• Missouri: Zombie foreclosures soared 85%, from 27 to 50, despite 43,380 homes listed for sale statewide.
• Michigan: A 44% increase, with numbers rising from 127 to 183, reflecting economic strain in areas like Detroit, where affordability remains a challenge.
• South Carolina: Up 37%, from 65 to 89, as coastal regions grapple with high insurance costs and economic slowdowns.
• Indiana: A 29% jump, from 168 to 216, driven by stagnant wage growth and rising mortgage rates.
• Kansas: A 26% increase, from 69 to 87, with Wichita’s median home price of $270,000 underscoring affordability pressures.

Major metro areas are also feeling the pinch. Houston led with 1,202 foreclosure starts in April 2025, followed by Chicago, New York, Miami, and Atlanta. In New Jersey, Somerset County saw a 54% year-over-year rise in first-time foreclosures, totaling 804 across 12 northern counties. These regional spikes signal deeper economic challenges, particularly in areas hit hard by high mortgage rates and declining affordability.Why Are Foreclosures Rising?The surge in zombie foreclosures is part of a broader increase in foreclosure activity, up 14% year-over-year in April 2025, with 36,033 properties receiving default notices, auction schedules, or repossessions. Several factors are driving this trend:

1. High Mortgage Rates: With rates hovering near 7%, homeowners with adjustable-rate mortgages or those refinancing face steep payment increases. The average mortgage rate in May 2025 was 6.82%, making homeownership less affordable.
2. Economic Pressures: Inflation and stagnant wages have strained household budgets. In areas like Florida and Texas, overbuilding and underwater mortgages—where homeowners owe more than their home’s value—are pushing defaults higher.
3. Climate-Related Costs: Rising insurance premiums due to extreme weather events, such as wildfires and floods, are exacerbating financial strain. A First Street analysis projects that climate-driven foreclosures could account for 30% of all foreclosures by 2035, up from 7% in 2025, with lenders potentially losing $5.4 billion annually in a decade.
4. End of Relief Programs: The expiration of pandemic-era forbearance and moratoriums has left homeowners facing ballooning back payments, accelerating foreclosure starts.

The Ripple EffectsZombie foreclosures and rising foreclosure rates have far-reaching consequences. Vacant homes depress property values, with neighborhoods seeing declines as abandoned properties fall into disrepair. In Cape Coral, Florida, once a pandemic boomtown, “For Sale” signs now line streets, and foreclosure “boat tours” highlight the market’s distress. Local realtor José Echevarria described it as “one of the worst real estate markets for sellers right now.”The broader housing market is also shifting. Unsold inventory surged 28.1% year-over-year in June 2025, hitting a post-pandemic high, while 20.7% of listings reported price cuts—the highest for any June since 2016. This buyer-friendly market, particularly in Florida and Texas, is putting downward pressure on prices, but it also risks flooding markets with distressed properties, further eroding values.What Can Be Done?For homeowners facing foreclosure, early action is critical. Contacting lenders to explore loan modifications or seeking help from HUD-approved housing counselors can prevent abandonment. In California, new laws are curbing foreclosures on “zombie” second mortgages, offering homeowners more options to fight back.Policymakers could consider targeted relief, such as reinstating limited forbearance programs or creating funds to assist with back payments. Community efforts, like legal aid and financial literacy programs, can also help families stay in their homes. For buyers, zombie foreclosures may present opportunities, but they require careful due diligence to avoid costly repairs or legal issues.A Call to ActionThe rise of zombie foreclosures is a stark reminder of the housing market’s fragility. While they remain a small fraction of the market, their increase—coupled with a 14% jump in overall foreclosures—signals a growing crisis. Homeowners, lenders, and policymakers must act swiftly to address the economic and environmental factors driving defaults. By prioritizing affordability, supporting at-risk borrowers, and tackling climate-related risks, we can mitigate the damage and protect communities from the blight of abandoned homes. The time to confront this rising tide is now.