Foreclosure Activity Edges Higher as Market Normalizes

The U.S. housing market is sending a subtle signal as it enters 2026. After several years of historically low distress levels, foreclosure activity has begun to rise again—not abruptly, but steadily—suggesting a market returning to something closer to normal.
According to the latest monthly report from property-data firm ATTOM, 40,534 U.S. properties recorded a foreclosure filing in January 2026, down 10% from December but up 32% from January 2025.
Lenders initiated foreclosure proceedings on 26,369 properties, up 26% from a year earlier, while completed foreclosures—properties repossessed by lenders—rose nearly 59% year-over-year.
Yet despite the increases, foreclosure activity remains well below historic crisis levels, an indication that most borrowers remain on stable footing even as pressures rise in certain pockets of the market.
For real-estate professionals who specialize in lender-owned inventory—REO brokers, asset managers, and distressed-property investors—the shift carries implications that are easy to miss in the broader housing narrative.

A Market Returning to Baseline

Foreclosure data has been distorted for years. Pandemic-era moratoriums and forbearance programs suppressed filings well below historical averages, creating an artificially calm period in distressed housing.
Now the pipeline is clearing.
ATTOM’s January figures show annual increases in filings, starts, and repossessions, reflecting what analysts describe as a gradual normalization rather than systemic distress.
In other words, the market is adjusting—not collapsing.
The distinction matters. Rising foreclosures are not necessarily a sign of broad financial instability; they often signal that lenders are processing delayed defaults and that housing finance is returning to its long-term equilibrium.

Where Activity Is Concentrating

ATTOM’s data shows foreclosure starts concentrated in a handful of large states, including Florida, Texas, California, Georgia, and New York, which together accounted for the highest counts in January.
These states share characteristics common in fast-growing markets:
  • Large populations and high transaction volume
  • Investor ownership in some submarkets
  • Significant migration-driven price swings
For brokers working in Texas markets like Dallas–Fort Worth, Austin, Houston, or San Antonio—and for investors active in Oklahoma City or Norman, where your CRE readership often focuses—this means distress may appear in specific neighborhoods long before it shows up in national headlines.

What Rising Foreclosures Mean for REO Inventory

The most important statistic for distressed-property professionals may not be filings or starts, but completions.
A completed foreclosure is an REO property—real estate owned by a lender.
With completed foreclosures up nearly 59% from a year earlier, the flow of lender-owned inventory is beginning to increase.
That matters because REO properties move through a different ecosystem:
  • Banks need brokers who understand valuation, compliance, and timelines.
  • Asset managers seek faster disposition to reduce carrying costs.
  • Investors watch REO listings as signals of local market stress.
For experienced REO brokers, modest increases in inventory can mean meaningful growth in assignments, particularly in markets where bank-owned inventory has been scarce for years.

Why the Trend Matters Now

The housing market remains constrained by limited supply and homeowners holding low-rate mortgages. But rising foreclosure activity suggests that some borrowers—particularly those facing resets, rising costs, or financial shocks—are under strain.
ATTOM’s data notes that foreclosure activity is climbing even as overall levels remain historically low, indicating pressure building in isolated areas rather than across the entire market.
This pattern is typical of a late-cycle housing market:
  • Distress appears first in high-leverage or high-growth segments.
  • REO listings increase slowly.
  • Investors return cautiously.

A Different Cycle Than 2008

The foreclosure increases of 2026 are occurring in a very different environment than the last housing crisis.
Mortgage underwriting standards are tighter, homeowner equity is stronger, and foreclosure activity remains far below historic peaks.
The implication is not a wave of distressed inventory, but a gradual reappearance of REO opportunities.
For lenders, the priority will be minimizing losses.
For investors, it will be identifying properties with viable economics.
For REO brokers, it will be execution.

The Role of the REO Specialist

When lenders repossess properties, they are not looking for generalists. They are looking for brokers who can manage an entire disposition process:
  • Accurate broker price opinions
  • Vendor coordination and property preservation
  • Compliance with local foreclosure and eviction laws
  • Targeted marketing to investor buyers
In markets like Texas and Oklahoma—where your Falcon Vision Studios clients often compete on presentation and marketing quality—this also means professional photography, aerial footage, and virtual tours even for distressed listings.
Banks want certainty.
Asset managers want speed.
Investors want clarity.
The REO specialist delivers all three.

A Market Signal Worth Watching

The January ATTOM report does not predict a housing downturn. It points to a housing market slowly returning to normal patterns after an extraordinary period.
Foreclosures are rising.
REO inventory is increasing modestly.
But homeowners overall remain financially stable.
For brokers focused on distressed assets, the data suggests something simple: prepare.
Because in real estate cycles, the quiet shifts matter most.