This terrifying yet real-life horror tale about real estate is perfect for Halloween: The current housing market is so competitive that purchasers are finding it difficult to locate “zombie” properties—homes that have been abandoned by their owners throughout the foreclosure process but have not yet been taken back by lenders.
They may be a deal even if they are abandoned and barren. However, it is quite difficult to locate them.
We made the decision to identify the cities with the highest percentage of unoccupied zombie homes since the country’s housing scarcity has reached dangerous levels. No brain-eating is necessary—investors and desperate, cash-strapped purchasers could be hankering after these houses!
What we discovered was as desolate a landscape as one might find following a zombie apocalypse.
Zombies constitute just 1.3% of the approximately 98.8 million residences in the nation, according to real estate data company ATTOM Data Solutions. In the fourth quarter of this year, there were only over 223,000 properties in the foreclosure process nationwide, a 3.7% decrease from the previous quarter. Furthermore, the likelihood of zombie houses developing in a foreclosed home is quite low.
I’m sorry, “Walking Dead” lovers, but animated corpses have nothing to do with a zombie franchise. It occurs when the homeowner has already left and the bank decides to stop or end the foreclosure procedure. This occurs when a property needs excessive maintenance or funding to reach a lucrative stage, or when a moratorium stopped the foreclosure process. In that scenario, the bank doesn’t do anything further with the property but could not even notify the homeowners that they are still the owners.
There is potential for significant profits when purchasing a zombie property, but it may also be a more difficult process than purchasing a regular house or even a classic foreclosure.
Astute purchasers may attempt to locate these elusive zombie properties for sale by contacting mortgage lenders, since they could have access to a list of houses that have been foreclosed. Zombie properties are often monitored by state and municipal authorities as well, as they have the potential to become abandoned and occupied by the homeless, which can negatively impact property prices.
Why are there fewer zombie homes for sale?
The nationwide foreclosure moratorium is mostly to blame for the decline in the quantity of these homes, which are popular among house flippers and people looking for inexpensive fixer-uppers. Lenders were temporarily prohibited from initiating the foreclosure process on homeowners with government-backed mortgages during the commencement of the COVID-19 epidemic. There are fewer houses available as a result of the housing scarcity.
“The general lack of homes for sale in the country has probably drawn buyers to foreclosed properties even when they were vacant,” adds Teta. “That implies they aren’t vacant for very long.”
According to the St. Louis Federal Reserve, the overall number of foreclosures has decreased significantly since the financial crisis of the 2000s, from a peak of 11.5% in 2010 to barely 2.5% in the second quarter of 2021. This is partially due to stronger restrictions in place since the financial crisis, but it’s also because lenders are more willing to collaborate with borrowers to save houses from being foreclosed.
Do not misunderstand: In general, zombie traits are detrimental to all parties. They frequently grow neglected and eventually become eyesores unless they are swiftly resold. If they are neglected, they may have a negative impact on the surrounding neighbourhoods. Additionally, zombie houses may attract squatters and illegal behaviour, which lowers the value of real estate in the area.
However, they may also present excellent chances for flippers or imaginative prospective homeowners searching for a deal.
Eric Seymour, a professor in Rutgers University’s department of planning and public policy, believes that working with borrowers over the long term is better for the bank’s bottom line than paying for upkeep and marketing of the homes.
WiIl more zombie properties hit the housing market?
Since the government moratorium on mortgage foreclosures ended at the end of September, there may be a rise in the number of zombie properties. According to a different ATTOM data, the number of properties with foreclosure files increased by 68% in the third quarter of 2021 when compared to the same period the previous year.
However, that does not imply that a new foreclosure catastrophe is about to start. To put things in perspective, there are still fewer foreclosure filings than there were before to the epidemic. Even though there were twice as many foreclosed homes in September 2021 as there were in September 2020, there were still over 70% less than in September 2019.
Due to the significant increase in house values over the last 18 months, homeowners who encounter financial difficulties can simply sell their property and circumvent the foreclosure procedure. This is the exact reverse of what occurred during the Great Recession, when values fell due to an excess of homes and a dearth of purchasers.
Dan Hammel, an assistant dean and geography professor at the University of Toledo, states that foreclosures “disappear when houses are selling for more than they did five years ago.” “Someone can simply move if they run into serious trouble.”
Patchwork foreclosure laws mean zombies pop up in unexpected places
The majority of zombie property strongholds are, predictably, economically distressed areas where homeowners are having difficulty making their mortgage payments. However, a few locations on the list defy this pattern.
In fact, Portland, Oregon, the well-known metropolis with a robust economy and expensive real estate, topped the list of metros with the greatest percentage of zombie homes. However, the metro’s unexpected appearance on the list is probably the result of the state surpassing the federal moratorium.
For individuals who were financially impacted by COVID-19, Oregon outlawed any residential foreclosures from the beginning of the outbreak last year. According to Portland-based foreclosure lawyer Michael O’Brien, this implies that even completed foreclosures couldn’t be sold legally. These properties are, therefore, vacant.
Honolulu, which came in at number five with a median list price of $699,000., was another surprising inclusion. However, it’s crucial to remember that, similar to other major American cities, there are very few zombie foreclosures.
Elsie Foster, lead broker and president of Foster Realty in Hawaii, notes that although the number of foreclosures has increased recently, it is still quite low overall. A backlog of cases following local courts’ temporary closure during the epidemic is most likely to blame. She claims that any foreclosures that occur today are the result of courts having to catch up.
Even in places where home values are far lower than the $380,000 national median, real estate markets are nevertheless booming. According to Laurel Smith, a real estate agent with Red Apple Real Estate in Fayetteville, North Carolina, which is ranked ninth on the list, cash buyers are snatching up the few foreclosures that are available there quickly. In the metro, the median list price of a property in September was $204,950.
According to Smith, speculators who want to flip a house or do some modifications and rent it out are snapping up foreclosures extremely fast. “The ones that are still for sale require extensive remodelling, or they may be situated in a less desirable area of the city.”
Zombie properties infiltrate the Midwest, Northeast
The majority of zombie properties are found in economically distressed regions of the Northeast and the Rust Belt in the Midwest, which have recovered somewhat slowly from the 2008 housing crisis. Job losses and other COVID-19-related economic effects exacerbated these already fragile housing markets.
“Those markets are typically found in some of the poorer areas of the nation, and homeowners there are more susceptible to foreclosure due to their limited ability to make mortgage payments in the event of a job loss,” according to Teta of ATTOM.
Industrial communities such as Cleveland (ranked No. 3), Fort Wayne, IN (ranked No. 4), Peoria, IL (ranked No. 6), Syracuse, NY (ranked No. 7), and Detroit (ranked No. 8) have seen years of hardship following the closure or downsizing of manufacturing companies. The closure of a Caterpillar facility in the 1980s was a major blow to Davenport, Iowa, No. 10.
Second on the list and home to the second-highest percentage of zombie properties was Wichita, Kansas. In the fourth quarter of the year, zombie properties made up around 15% of all residences in the pre-foreclosure process. In September, the metro area’s median list price for a property was $204,950.
While every case is unique, Jerrome Castillo, broker/owner of Titan Realty in Wichita, who specialises in foreclosures, says that the majority of zombie properties in this area occur when the owner is laid off or faces other financial difficulties. (Mass layoffs at Boeing, a local firm, at the start of 2020, Castillo adds, had an impact on the neighbourhood.)
According to Castillo, some “people don’t understand where they’re at in the [foreclosure] process.” “They bury their heads in the sand after falling into this quicksand and believing everything will be alright.”
Where can astute purchasers still find affordable homes, then? Metropolitan regions with at least 100,000 residential properties and at least 100 homes that could be in foreclosure were examined by ATTOM Data. Metros consist of the major city and the towns, suburbs, and smaller urban regions that surround it.
We only included one metro per state in this ranking to ensure geographic variety.
Bring your corpses out!
- Portland, Oregon
September’s median house price was $554,925.
In Q42021, there were 124 pre-foreclosure properties.
15.3% of properties are zombie-related. - Kansas City, Wichita
Price of a median home: $204,950
Properties in pre-foreclosure: 120
15% of properties are zombie-related. - Ohio’s Cleveland
Price of a median home: $199,450
4,547 pre-foreclosure properties
11.7% of properties are home to zombies. - Indiana’s Fort Wayne
Price of a median home: $227,388
Properties in pre-foreclosure: 127
Properties with zombies: 11% - Hawaii’s Honolulu
Average cost of a house: $699,000
Properties in pre-foreclosure: 217
10.6% of properties are zombie-related. - Illinois’s Peoria
Price of a median home: $119,950
Properties in pre-foreclosure: 645
10.4% of properties are zombie-related. - New York City, Syracuse
Price of a median home: $192,400
1,054 pre-foreclosure properties
9.9% of properties are home to zombies.
- Michigan’s Detroit
Price of a median home: $252,500
Properties in pre-foreclosure: 555
8.8% of properties are home to zombies. - North Carolina’s Fayetteville
Price of a median home: $204,950
Properties in pre-foreclosure: 241
8.7% of properties are home to zombies. - Iowa’s Davenport
Price of a median home: $141,250
Properties prior to foreclosure: 504
8.5% of properties are home to zombies.
This study was made possible by Clare Trapasso.
