Foreclosure auctions rise in Q1 after VA moratorium expires

Foreclosure auction activity across the U.S. rose to a six-quarter high during the first three months of 2025, fueled by a surge in properties that hit the market after the expiration of post-pandemic protections, according to a report from Auction.com.

Completed foreclosure auctions were up 20% from the previous quarter and up 4% from a year earlier, despite some mid-quarter softening. Scheduled foreclosure auctions, a leading indicator of future completions, also rose 14% quarterly to a five-quarter high.

Foreclosure auction volume remains below pre-pandemic levels — currently standing at 49% of what it was in early 2020 — but is steadily recovering.

Activity increased across all loan types except those backed by the U.S. Department of Agriculture (USDA). Loans guaranteed by the U.S. Department of Veterans Affairs (VA) saw the sharpest jump, with auction volume more than doubling year over year after the expiration of a VA foreclosure moratorium at the end of 2024.

While foreclosure volume was up, demand from auction buyers showed signs of weakening amid economic uncertainty. The foreclosure auction sales rate — properties sold to third-party buyers — began the year strong but fell sharply in February to a 26-month low point before partially rebounding in March. Overall, the Q1 2025 sales rate declined compared to a year ago.

Real estate-owned (REO) auction activity, which involves properties that have reverted to lenders, also showed mixed signals. The number of bidders per asset increased slightly from the previous quarter, but the sales rate dropped 16% compared to a year ago.

Half of the major metro areas analyzed by Auction.com posted year-over-year declines in foreclosure auction demand.

Major markets such as Houston, Chicago, Dallas, St. Louis and Atlanta recorded double-digit declines. Meanwhile, cities like New York, Philadelphia, Detroit, Washington, D.C., and Minneapolis saw modest gains.

Buyer caution evident as price demand slips

Auction.com data shows that price demand — the share of the after-repair value that buyers are willing to pay — flattened in early 2025 compared to the prior quarter and declined from a year earlier.

Foreclosure auction price demand held steady sequentially at 56.7%, up slightly from 55.9% in Q4 2024 but down from 59% a year earlier, the report showed.

Monthly figures reflected steady erosion as price demand fell 2% year over year in January, 4% in February and 6% in March. REO auctions followed a similar pattern, with initial gains in January fading into declines by March.

Of the 76 markets analyzed, 59% recorded annualized drops in foreclosure auction price demand. Cities such as Chicago, Houston, Philadelphia and Dallas saw the sharpest decreases. A few markets bucked the trend, including Minneapolis, where price demand surged 57% annually.

State level recovery uneven

Foreclosure auction volume grew most sharply in Arizona (up 151%), Utah (up 100%), New Hampshire (up 80%), Kansas (up 74%) and Texas (up 73%). Among larger states, trends were mixed. Texas, Illinois and Michigan posted annual increases, while New York and Ohio posted declines.

Several states, including Connecticut, Colorado, Wyoming and Minnesota, reported foreclosure auction volumes above pre-pandemic levels.

REO supply also rose modestly, climbing 2% from the previous quarter and 3% from a year earlier to reach a six-quarter high.

Buyer-seller disconnect

The gap between buyer offers and seller expectations remained stable for foreclosure auctions but narrowed for REO auctions.

With foreclosure auctions, the spread held at 7 percentage points, more than double the 3-point spread seen a year ago. Seller pricing increased by 100 basis points compared to the previous quarter, contributing to the wider gap. For REO auctions, the spread narrowed to 10 points, down from 12 points in Q4 2024, which was largely due to stronger buyer bids.

A total of 93,953 properties had foreclosure filings from January through March — an 11% increase from the previous quarter, according to recent data from ATTOM.