Even as demand from auction buyers fell to multi-year lows, the supply of distressed properties up for auction continued to increase in the second quarter of 2025, hitting two-year highs. This suggests a change in the distressed market that may have repercussions for the larger real estate market.
“The interest rates have killed the market,” wrote a Texas-based Auction.com buyer 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.”
The slow increase in distressed volume over the last two quarters will probably further depress home price appreciation, which is already being weighed down by the growing number of properties available for purchase in the retail sector, even if distressed volume is still well below pre-pandemic levels. The distinct decline in demand from auction buyers over the previous year suggests future weakness in the retail housing market, and auction buyers as a group are a solid indicator of future retail market trends.
“Existing homes have crashed,” the Texas-based buyer continued. “Homeowners are starting to drop prices to sell homes to ward off foreclosure, which is creating a lower appraised value nightmare for investors.”
Homebuyer Landscape — National
Unchanged from the previous quarter but up from 34% in the third quarter of 2024, 38% of Auction.com purchasers surveyed in July stated that the current state of the market makes them less inclined to purchase.
With 37% of respondents stating that they intend to purchase more auction properties in the upcoming three months as opposed to the preceding three months, buyer expectations for the upcoming months were more optimistic. That was an increase over the survey’s prior quarter’s 33%.
“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 but that he is planning to buy more in the next three months.
The majority of loan types saw supply rise on the foreclosure auction front, but Veterans Administration (VA) loans led the way with an annual increase of 428 percent after a VA foreclosure moratorium ended in December 2024.
A declining third-party sales rate at foreclosure auctions accelerated the natural flow of rising volume to REO auctions. Unoccupied properties led the REO auction volume, rising 31% from a year ago to a five-year high.
“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 aged inventory of unused, 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.”
The appetite of buyers waned. The foreclosure auction sales rate ended the quarter in June at a 30-month low, down 4% from the previous quarter and 12% from the previous year.
The decline at the foreclosure auction was reflected in the demand for REO auctions. Bidders per asset fell to their lowest level since 2019, down 9% from the first quarter and 21% year over year. Although overall involvement is still low, a slight increase in June suggests a tentative floor.
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The post Q2 Snapshot: Foreclosure Auctions Jump to Two-Year High first appeared on The MortgagePoint.
