RealtyTrac: Nation Faces Zombie Outbreak

by James McClister

RealtyTrac’s Q2 Zombie Foreclosure Report shows macro progress and micro struggles


Zombies are plaguing the nation, but no amount of shotgun shells and machetes are likely to help. Less likely to shuffle after a person’s brainy bits than they are to sink them into debt, zombie foreclosures describe properties once going through the foreclosure process but were abruptly dismissed after the homeowner had vacated the property but not the title. According to RealtyTrac’s Q2 Zombie Foreclosure report, though their significance – as well as the significant of foreclosures in general – has waned nationwide, the problem still persists.

More than 127,000 owner-vacated zombie foreclosures were on the market as of the end of the second quarter, marking a moderate 10 percent decline from Q2 2014. The drop represents recovery in the market, but as RealtyTrac researchers pointed out, zombie foreclosures still amount for about one in every five U.S. property foreclosures, and one in every 1,040 total housing units.

In RealtyTrac’s review of 183 metropolitan areas, 91 were found to have experienced year-over-year increases to zombie foreclosures in the second quarter.

Total Zombie Forclosures1


In Houston, zombie foreclosures are proving a far more pesky problem than actual foreclosures, because while overall foreclosure levels are down and dropping still, the city’s zombie foreclosures are on the rise. From Q2 2014, zombie foreclosures in Houston have risen 38 percent to 442, bringing their share of total foreclosures up to 18 percent.

Statewide, zombie foreclosure performance was much less pronounced, as levels declined 1 percent year-over-year to a 20 percent share of total foreclosures.


Share of Zombie Forclosures2

Zombies Worth Less

Zombie foreclosures tend to crop up in low income areas where lenders have less incentive to hurry the property back onto the market, which later translates into a dismissed foreclosure. Not only will the lingering payments attached to the house come back to haunt the unassuming title holder, who probably believes the house to be in foreclosure, but when the property finally sells, it’s likely to perform much poorer on the market than its occupied counterparts, which may also bring down surrounding property values.

  • The average market value of an owner-vacated zombie foreclosure in the second quarter was $195,856, 78 percent (or 22 percent below) the average market value of owner-occupied foreclosures ($251,236).
  • The average square footage of an owner-vacated zombie foreclosure in the second quarter was 1718, 92 percent of the average square footage of owner-occupied foreclosures (1873).

But not all zombie foreclosures can be attributed to lenders. Some are simply a matter of the owner passing away during the process.

  • Six percent of all owner-vacated zombie foreclosures involved a homeowner who is deceased, compared to 3 percent of all owner-occupied foreclosures with a deceased homeowner.

A Matter of Policy

The national shedding of zombie foreclosures is being heralded as a welcome sign of progress, but the widespread increases at the metro level are concerning. Daren Blomquist, vice president at RealtyTrac, said the divided in cities’ performances is, in part, the result of varying degrees of legislative effort.

“A growing number of states and cities have enacted public policy measures to combat the problem of zombie foreclosures, and we are seeing the results of those efforts in the overall decrease nationwide as well as in several hard-hit markets such as Chicago, Miami and Cleveland,” he said.

Blomquist added that in some markets, such as Houston and Boston, the increases, which he describes as “somewhat surprising,” are largely the product of procrastinating banks that are only now pushing through long-deferred foreclosures. Perhaps more surprising than the foreclosure increases are the potential gains banks are abandoning to push these foreclosures onto the market.

He said: “The average estimated market value of an owner-vacated foreclosure is 22 percent below the average estimated market value of an owner-occupied foreclosure, indicating that it is in the foreclosing bank’s banks best interest to have a home occupied during the foreclosure and also demonstrating how these zombies are contributing to blight in neighborhoods across the country.”

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