Foreclosure auctions rise in Q2 2026, with FHA loans driving gains

Distressed property foreclosure auction activity continued to climb in the second quarter of 2026, driven largely by Federal Housing Administration (FHA)-insured mortgages and home loans originated after the COVID-19 housing boom, according to Auction.com‘s new Auction Market Dispatch report released Wednesday.

Completed foreclosure auctions reached 66% of first-quarter 2020 levels during Q2 2026, matching a six-year high set in the first quarter of this year and up 23% year over year.

Scheduled foreclosure auctions climbed to 71% of Q1 2020 levels, up 13% year over year and the highest level in more than six years, signaling additional increases in completed foreclosure auction volume in the third quarter.

Both scheduled and completed foreclosure auction volumes have now increased annually for six consecutive quarters, the report noted.

“So far, the steady rise in foreclosure auction volume over the last year and a half looks more like a reversion to the mean rather than the beginning of a new broad-based housing crisis — despite some of the lofty percentage increases,” Daren Blomquist, head of market economics at Auction.com, said in a statement.

“That said, there are pockets of mortgages and geographies where the foreclosure auction numbers are more concerning: namely mortgages originated in 2022 or later — particularly for the FHA-insured book — and in states like Texas, Arizona and Colorado where foreclosure auction volumes are now well above pre-pandemic levels.”

The report found foreclosure auction activity was strongest among government-backed loans. Completed foreclosure auctions involving loans insured by the Department of Veterans Affairs (VA) reached 106% of first-quarter 2020 levels, up 14% from a year earlier. FHA loans reached 95% of pre-pandemic levels, increasing 47% year over year.

Foreclosure auctions involving conventional loans backed by Fannie Mae and Freddie Mac were at 68% of Q1 2020 levels, up 27% annually.

Loans originated in 2022 or later accounted for 45% of all completed foreclosure auctions during the quarter, the largest share of any loan vintage analyzed and more than double the level recorded a year earlier. By comparison, loans originated between 2005 and 2009 represented 10% of completed foreclosure auction volume, although that share declined 11% year over year.

Bank-owned, or real estate-owned (REO), auction volume declined 3% from the first quarter but remained 11% higher than a year earlier, marking the sixth consecutive quarter of annual growth.

Buyer demand also strengthened across both foreclosure and REO auctions. The foreclosure auction sales rate increased 12% from the previous quarter and 3% from a year earlier, reaching 114% of its first-quarter 2020 benchmark. The REO auction sales rate rose 11% quarter over quarter and 43% year over year to a four-year high, reaching 95% of its pre-pandemic benchmark.

Auction.com attributed stronger demand in part to lower seller pricing. The average credit bid-to-market value ratio at foreclosure auctions declined 3% from the previous quarter, while the average reserve-to-market value ratio at REO auctions fell 2% quarter over quarter and 6% from a year earlier.

Bid-ask spreads narrowed in both foreclosure and REO auctions, indicating closer alignment between seller pricing and buyer expectations.

Despite lower seller pricing, buyers at foreclosure auctions were willing to pay an average of 66.5% of estimated retail market value during the second quarter, up slightly from 66.2% in the first quarter and 66% a year earlier. Buyers at REO auctions paid an average of 65% of estimated retail market value, down from 65.3% in the prior quarter and 66.7% a year earlier.

On a state level, 31 states posted year-over-year increases in completed foreclosure auction volume, while 16 states and the District of Columbia exceeded their first-quarter 2020 levels. Texas, Florida, Georgia, Illinois, Ohio, California and Michigan recorded the highest foreclosure auction volumes.

Among larger states, South Carolina posted the largest annual increase, with foreclosure auction volume rising 112%, followed by Colorado at 99%, Georgia at 89%, Kentucky at 78% and North Carolina at 76%.

Texas, Arizona, Minnesota, Louisiana and Colorado all recorded foreclosure auction volumes above pre-pandemic levels, while Florida, Georgia, Illinois, Ohio and California remained below first-quarter 2020 levels.

This article was generated using HousingWire Automation and reviewed by a HousingWire editor before publication.