Foreclosure- and bank-owned auction volume jumped to their highest levels in years, but buying activity didn't keep pace with the rise in inventory, according to the latest report from Auction.com.
"Volume increased across all loan types and in 43 states," the quarterly report stated.
Similarly, inventory of bank, or real estate-owned units increased 24% to its greatest level in more than five years.
Struggling government-backed mortgage borrowers drove much of the increase in fourth-quarter inventory. The end of a federal foreclosure moratorium for Department of Veterans Affairs borrowers in mid 2025 brought with it a 428% year-over-year leap in auction properties during the fourth quarter.
Homes that once belonged to borrowers with FHA-insured loans, a group that
Meanwhile, mortgages held by the government-sponsored enterprises brought a 33% surge in auction inventory. Privately-held liens saw a 12% increase, and U.S. Department of Agriculture-insured mortgages rose by 10%.
Even with the noticeable growth, current auction volume is still running 39% below pre-Covid levels of first quarter 2020, the online platform said.
Current market conditions, including falling interest rates, also led to revived interest in placing bids, according to comments from the platform's buyers. Twenty-three percent of respondents expressed willingness to purchase in the fourth quarter up from 19% three months earlier. The fourth-quarter share headed back upward to approach the 24% reported one year prior.
Sales activity fails to match inventory growth
While a decline in rates have caught buyers' attention, transaction activity painted a mixed picture of actual sales trends, as pricing appeared to hold some back.
The sales rate of foreclosure auctions, a signal of willingness to buy at the initial price indicated, fell 15% from the fourth quarter of 2024 to its lowest in nearly six years, with 69% of the markets analyzed posting drops.
National sales also pulled back 7% from the third quarter to end the year at a 68-month low in December.
Pricing trends accounted for some buyer hesitance at foreclosure auctions, according to Auction.com. Initial foreclosure sales values were at their most elevated since mid 2020 with a sharp jump in asking prices, it said.
Running counter to trends in the foreclosed market, REO auction pricing came in at its lowest since late 2020, with buyer demand correspondingly rising 29% from both the previous quarter and year in response.
Despite subdued foreclosure-sales activity, some buyers still seemed willing to dole out more money for homes, at least in some markets, Auction.com said.
Their transactions led to winning purchase bids nationwide to average 67.4% of estimated value between October and December, rising from 66.6% one year earlier and 66.2% in the third quarter. However, pricing decreased throughout the final three months of the year.
Buyers at REO auctions similarly paid 65.2% of estimated value on average in the fourth quarter. The percentage crept downward from 65.6% on a year-over-year basis and 65% three months earlier.
Rising auction volume was especially prevalent in the Southeast, where four states more than doubled the number of homes brought to inventory compared to 12 months earlier. Florida led the country with 176% growth, followed by South Carolina at 153%.
While growth in auction-property volume was widespread, only 13 states have inventory currently above their levels from pre-pandemic 2020, including Texas, Louisiana and Colorado, the platform said.
