Foreclosure auction volume rises 19% after VA moratorium expires

Foreclosure auction volume in the second quarter of 2025 increased 19% from the same period last year and reached a two-year high point, according to Auction.com‘s newest Auction Market Dispatch report that was released on Tuesday.

The increase was largely driven a surge in foreclosures involving properties backed by U.S. Department of Veterans Affairs (VA) loans, which jumped 428% from a year ago after a moratorium expired in December 2024.

Demand from auction buyers dropped to multiyear lows, signaling a shift in the distressed housing segment that could have implications for the broader real estate market.

“The interest rates have killed the market,” a Texas-based Auction.com buyer wrote in response to a buyer survey conducted in the second week of July. “My hold time from two years ago was averaging 120 days. Now I have properties that are sitting with over two years on market.

“Existing homes have crashed. Homeowners are starting to drop prices to sell homes to ward off foreclosure, which is creating a lower appraised value nightmare for investors.”

The cooling demand is already reshaping the market. In the July 2025 survey, 38% of Auction.com buyers said current conditions have made them less willing to purchase, unchanged from Q1 2025 but up from 34% in Q2 2024.

Still, some real estate investors remain cautiously optimistic. About 37% said they plan to buy more auction properties over the next three months, up from 33% in the first quarter.

“I am holding liquid assets due [to] unfavorable and volatile market conditions. Waiting for [the] right entry,” wrote a Northern California-based survey respondent who said market conditions have made him less willing to buy, although he is planning to buy more in the next three months.

The rise in foreclosures has led to more properties ending up in real estate-owned (REO) auctions, especially as fewer are being bought by third-party buyers. Vacant properties made up the largest share of this increase, jumping 31% from a year ago to reach a five-year peak.

“The rise in vacant properties available to buy at auction is good news for the housing market because it means sellers are clearing out more distressed housing stock that can now be transformed into much-needed housing supply by auction buyers,” said Ali Haralson, president at Auction.com.

“It’s also good news for less experienced auction buyers, including even owner-occupant buyers, because these vacant properties are typically more accessible, allowing for interior access and not requiring the new buyer to deal with any current occupants.”

While foreclosure levels are still far lower than before the COVID-19 pandemic, the steady increase in distressed properties over the past two quarters is likely to add more pressure on home prices — which are already feeling the impact from more homes for sale through the retail the regular market, Auction.com noted.