Foreclosure Starts Are Rising Again: What 2025’s Numbers Really Mean for Real Estate Investors in 2026

Quick Summary

Foreclosure starts (the first public sign of distress) were a key theme in 2025—and by year-end, the data confirmed it: foreclosure activity rose 14% nationally versus 2024. But this isn’t a 2008-style collapse. It’s a “market recalibration” where localized stress creates selective opportunity—if you know where to look and how to act early. (ATTOM)

Why Foreclosure Starts Matter More Than Foreclosure Headlines

Most investors chase the loudest stage: auctions, REOs, and “bank-owned deals.”

But the best positioning often happens earlier—at the foreclosure start, when the homeowner still holds title and the situation is more flexible. That’s the stage BiggerPockets highlighted as the “earliest window” for negotiating before competition floods in later.

Think of it like this:

Foreclosure starts = early warning + potential direct-to-homeowner paths
Auction = public, competitive, compressed timelines
REO = bank process, retail-ish pricing, lots of friction

If you want less competition and more optionality, you care most about the start.

How 2025 Ended: The Hard Numbers (Full-Year, Not Guesswork)

ATTOM’s Year-End 2025 U.S. Foreclosure Market Report is the cleanest snapshot of what actually happened across the entire country:

National totals (2025)

367,460 U.S. properties had foreclosure filings in 2025 (+14% vs. 2024).
That equals 0.26% of U.S. housing units—still far below the last crisis era.
Lenders started the foreclosure process on 289,441 properties in 2025 (+14% vs. 2024).
REO (bank repossessions) totaled 46,439 in 2025 (+27% vs. 2024).

Where starts were highest (volume)

Top states by foreclosure starts in 2025:

Texas: 37,215
Florida: 34,336
California: 29,777
Illinois: 15,010
New York: 13,664

Where foreclosure rates were worst (intensity)

States with the highest foreclosure rates in 2025 included:

Florida (1 in 230 housing units)
Delaware (1 in 240)
South Carolina (1 in 242)
Illinois (1 in 248)
Nevada (1 in 248)

What this means: distress is real—but it’s uneven. The opportunity is not “nationwide.” It’s market-by-market, county-by-county, zip-by-zip.

The 2026 Setup: Rates Are Still High Enough to Punish Weak Deals

As of Feb 5, 2026, Freddie Mac’s national average is:

30-year fixed: 6.11%
15-year fixed: 5.50% (Freddie Mac)

That rate environment does one big thing: it exposes “almost deals.”

Thin spreads die.
Overlevered projects choke.
Bad rehab timelines get expensive.
Buyers become payment-sensitive fast.

So in 2026, foreclosure opportunities reward investors who underwrite like pessimists and operate like professionals.

What’s Actually Happening: “Normalization,” Not a Crash

ATTOM’s CEO described the 2025 rise as continued “normalization” after historically low activity—more recalibration than widespread distress, helped by strong equity positions and tighter lending compared to the last cycle.

So the right mindset isn’t panic.
It’s precision.

Foreclosures rising doesn’t mean “everything is about to collapse.”
It means some owners are breaking under the math—and those situations produce motivated conversations that didn’t exist a year ago.

What This Means for Real Estate Investors in 2026

1) Expect more “problem solving” deals, not unlimited cheap inventory

Foreclosure starts are a pipeline. Not every filing becomes an auction deal you can scoop.

In fact, foreclosures can take a long time to move through the system. In Q4 2025, foreclosed properties averaged 592 days in the foreclosure process nationally. That lag matters when you’re building a deal machine.

2) The best deals will be pre-foreclosure, not courthouse steps

The BiggerPockets “starts” article nailed why early-stage filings matter: you’re closer to the homeowner, earlier in the timeline, and you can structure solutions before it becomes a public bidding war.

3) “Key states” matter—because distress clusters

Even in 2025, BiggerPockets flagged specific states showing rising pressure (Texas, Ohio, North Carolina, Florida, California) based on ATTOM’s month data—your job as an investor is to translate those signals into a local pipeline.

The 2026 Foreclosure Playbook: How to Win Without Getting Cute

Step 1: Pick your lane (and don’t mix strategies blindly)

Wholesale / novations: great if you have marketing + buyers
Fix & flip: only if you have speed and hard margins
Buy & hold: best if you can buy at a basis that survives 6% money
Sub-to / creative: powerful where seller pain > buyer options (do it legally, carefully)

Step 2: Hunt earlier than everyone else

Build a system around starts—not REO headlines:

Track starts monthly
Focus on 1–3 counties
Work consistent outreach
Measure conversion: contact → appointment → offer → close

Step 3: Structure solutions that reduce friction

Pre-foreclosure is a negotiation environment. Common solution paths include:

Short sale
Deed-in-lieu
Cash for keys / relocation assistance
Reinstatement / assumption (where viable)

The investors who win in 2026 won’t be the loudest. They’ll be the ones who can calmly solve a messy situation with clean execution.

Mistakes to Avoid in 2026

Confusing foreclosure filings with instant deal inventory
Underwriting your exit like rates are about to collapse
Assuming every market moves the same
Buying “cheap” without understanding why it’s cheap
Ignoring timeline risk (foreclosure process delays are real)

Bottom Line

2025 ended with foreclosure activity up—but still far below historic crisis levels.
2026 starts with mortgage rates around 6.11%, meaning weak deals get punished and disciplined operators get paid. (Freddie Mac)

If you want to benefit from this cycle, stop chasing the end of the foreclosure process.

Start building a pipeline around the beginning of it.