Foreclosure activity rebounds as VA moratorium ends

Completed foreclosure auction volume increased by 4% annually in the first quarter and by 20% compared with the fourth quarter of 2024. This is the most since the second quarter of 2023.

January's activity spiked to a 21-month high. Volume did decline between January and February, but picked back up with a 5% annual gain in March, the Q1 2025 Auction Market Dispatch report stated.

VA foreclosures spike but still a small slice of the market

But even with the 104% annual increase in VA foreclosure auctions, they were just 6% of the completed sales during the quarter, Auction.com noted. In addition to the moratorium's expiration, the Trump Administration is terminating the Veterans Affairs Servicing Purchase program.

GSE and FHA loans dominate auction sales

The largest share of auction sales was for loans sold to the government-sponsored enterprises, at 34%; and Federal Housing Administration-insured mortgages at 32%. The annual change in volume was an 8% gain for the GSE mortgages and 5% for FHA.

Private-label mortgages were flat compared with the first quarter of 2024 and had an 18% share of sales this year.

Meanwhile, the U.S. Department of Agriculture-guarantee program was the only one with less activity compared with one year ago, down 12%, and had the second smallest share of Q1 2025 volume with 8%.

Foreclosure pipeline swells, but buyer appetite lags

"Scheduled foreclosure auctions rose 14% from the previous quarter to a five-quarter high — a potential harbinger of continued elevated completions into [the second quarter]," Auction.com said. "Despite the gains, total completed auction volume remains at just 49% of its pre-pandemic level," which it defined as the first quarter of 2020.

When it comes to demand from property purchasers, "signals were less decisive," the report declared.

"Although activity started strong in January, it softened notably in February and March, keeping the overall Q1 sales rate essentially flat quarter-over-quarter and down from a year earlier. Meanwhile, buyer pricing behavior weakened — a trend more pronounced as the quarter progressed, especially among foreclosure auction participants."

Investor confidence falters amid market uncertainty

A separate report released earlier this month, the RCN Capital/CJ Patrick Company Investor Sentiment Index, found real estate investors, many of whom are active at foreclosure auctions, were more concerned about the state of the market than in past periods.

The index was down by 9 points compared with the fourth quarter and 12 points from one year prior to 88 for Spring 2025, the lowest in the brief history of this index that was started in Fall of 2023. The highest point was just two periods ago, at 124.

"Investor sentiment is trending along the same lines as homebuilder sentiment and consumer sentiment, which recently recorded its second-lowest score in over 50 years," said RCN Capital CEO Jeffrey Tesch in a press release. "Our survey results suggest that enthusiasm among both rental property and fix-and-flip investors is being challenged by economic uncertainty, rising home prices and insurance prices, and high finance costs."

Tesch is hoping market conditions will become more favorable for investors in the next few months.

Auction prices slide as Q1 progresses

Price demand, the amount buyers are willing to pay during an auction relative to a property's estimated value after repairs, flattened in the first quarter, falling 2% annually in January, by 4% for February and by 6% in March, the Auction.com report added."Real estate owned price demand followed a similar arc — rising 3% quarterly and 1% annually to 57.9% — but with monthly softening," the report said. "After starting strong with an 8% year-over-year jump in January, gains flattened in February and turned to a 4% decline in March."