2021 Brings in New States Topping the Foreclosure Charts

Key Takeaways

August 26th marked the lifting of the 17-month federal foreclosure moratorium; we at Knock wanted to look into the states most impacted by foreclosures throughout the Covid-19 period and the indicators contributing to their susceptibility. 

Overall, data shows that foreclosures have down-trended nationally year-over-year since 2010. This can be attributed to the economy’s recovery over time from the Great Recession. In the years preceding this event, we have seen many improvements in pertinent metrics vital to our nation’s housing health, including rises in income, investment, and lowering interest rates. This overall increase in economic health has led us to a point in 2020 where foreclosures have hit their lowest levels in a decade. However, with the Covid-19 unemployment spike felt across the country, and the ending of the foreclosure moratorium, we are beginning to see an uptick in foreclosures in 2021, with increases in certain states that have had fewer relative foreclosures historically.

Line graph indicating the downward trend of real estate owned foreclosure transactions from 2015 to 2021

Analysis of the states with the highest percentage of real estate owned (REO) transactions out of total fair market transactions revealed that Virginia and Georgia had taken the lead, outpacing New Jersey and Mississippi, which had the highest percentage of foreclosures in previous years. To dive deeper into the circumstances that caused this shift, we selected a combination of metrics that encompass both current market conditions and longer rooted trends such as, home price appreciation, unemployment rates, debt to income ratios, income inequality, and the time it takes for a foreclosure in a state. 

We found that home price appreciation changes, unemployment rates, and debt to income ratios had a strong correlation to REO transactions when regressed historically, with income inequality showing a moderate correlation. This can be attributed to home price appreciation's integral role in maintaining and growing homeowner’s equity, as a home is one of the largest investments and possible returns made in a person's lifetime. Without the financial capacity to save, unemployment is the leading force in foreclosure rates as high debt to income ratios indicate more long term trends of financial overburden. Furthermore, income inequality plays a part in identifying populations where these aforementioned forces can have a stronger impact. When combined, the foreclosure response to these sensitivities can either be delayed or accelerated by that state's approach to foreclosure processes.  Whether a state has judicial or non-judicial routes ultimately determines its impact on delinquent homeowners.

States with judicial foreclosure processes, meaning the lender must file suit against the homeowner in a court of law, tend to take longer and can span years from the initial notice of delinquency to the loss of a home. Those states with non-judicial foreclosure processes can take as little as 100-200 days. This stark distinction in timing between foreclosure procedures gives homeowners in default in non-judicial states less time to access remedies and come up with missed mortgage payments. Furthermore, another safeguard for some states not seen in the top foreclosure list is those with added protection for homeowners in the foreclosure process. States like California, Colorado, Minnesota, and Nevada all passed laws to increase homeowner protections, further slowing down the process due to the requirements lenders and servicers must comply with under these laws.6

However, the introduction of Virginia, Georgia and New York to the foreclosure top 5 shows an evolution from the states chronically seen at the top of the foreclosure list. Our analysis found that home price appreciation has become a double edged sword when it comes to foreclosures in 2021. Previously, lack of home price appreciation has been attributed to underwater mortgages and high foreclosure rates, but in 2021, we are finding that large increases in home price appreciation is proving just as detrimental to states with higher percentages of at risk homeowners. States with high unemployment, income inequality and debt to income ratios are seeing upticks in foreclosures as homeowners inability to keep up with the tax burdens associated with the drastic year-over-year increases in market values takes effect. In 2021, on average Virginia’s property taxes increased 9%, Georgia’s at 14%, and New York at a whopping 21%. These added tax burdens are disproportionately burdensome to the long term homeowners who stayed put amidst the pandemic as their assessments reflect the market values of the homes that did sell, and the homeowners who could afford them. This additional cost to homeowners is one they are expected to bear as the federal foreclosure moratorium and its forbearance came to an end. 

Chart listing the top 5 foreclosure states from January to September 2021: Virginia, Georgia, New Jersey, Mississippi, New York.

Within these top states, the townships with the most REO’s are; Richmond, VA (11%), Chattanooga, GA (5%), Vineland, NJ (5%), Jackson, MS (2%), and Corning, NY (5%).

This causality in foreclosure rates has shifted from the signifying factors we have grown to know in previous years. Below find the states more synonymous with high foreclosure rates since the Great Recession;

Chart indicating the top 5 foreclosure states in 2019: New Jersey, Mississippi, Delaware, Connecticut, New Mexico

Within these top states, the townships with the most REO’s were; Vineland, NJ (45%), Jackson, MS (13%), Dover, DE (7%), Torrington, CT (12%), and Albuquerque, NM (6%).

These states were some of the slowest to recoup their peak home price values from pre-Great Recession, and those hit hard with unemployment recovery from 2009 to 2019. The percent each state recuperated from their fall from pre-Great Recession home price peak’s by 2019 show: New Jersey (10%), Delaware (-6%), New Mexico (11%), Mississippi (8%), and Connecticut (-11%), compared to the national average home price appreciation recovery of 23%. Since the Great Recession, this failure for many states to regain the home value lost, left many long-term homeowners with underwater mortgages until recently.  

Pandemic-induced housing demand has jump-started home price growth across the country, providing year-over-year increases at nearly 15-20x the average rates felt over the last decade for the states reflected in the 2019 chart above. The HPI growth of the states previously at the top of the foreclosure charts from 2019 to 2021 include Connecticut (22%), New Jersey (20%), Delaware (19%), New Mexico (19%), and Mississippi (14%). In all states, this marked full recuperation of peak home prices from pre-Great Recession times, as well as home price appreciation increases more inline with national averages. If home price appreciation continues for these states with high foreclosure rates in recent years, we expect the percent of real estate owned transactions to remain low in these states.


  1. The investopedia team. “Unemployment Rate.” Investopedia.com, Investopedia, 28 September 2021, https://www.investopedia.com/terms/u/unemploymentrate.asp. Accessed 2021.
  2. Investopedia team. “Debt-to-income(DTI) ratio.” Investopedia.com, Investopedia, 14 March 2021, https://www.investopedia.com/terms/d/dti.asp. Accessed 2021.
  3. Investopedia Team. “House Price Index(HPI).” Investopedia.com, Investopedia, 26 August 2021, https://www.investopedia.com/terms/h/house-price-index-hpi.asp. Accessed 2021.
  4. Investopedia Team. “Gini Coefficient.” Investopedia.com, Investopedia, 28 April 2021, https://www.investopedia.com/terms/g/gini-index.asp. Accessed 2021.
  5. Perez, Yarilet. “Foreclosure Definition.” Investopedia, 2021, https://www.investopedia.com/terms/f/foreclosure.asp. Accessed 6 December 2021.
  6. Loftsgordon, Amy. “Special Foreclosure Protections in Colorado, Minnesota, and Nevada.” Nolo, https://www.nolo.com/legal-encyclopedia/special-foreclosure- protections-in-colorado-minnesota-and-nevada.html. Accessed 6 December 2021.

Data Resources

  1. MLS data - ATTOM data solutions
  2. Unemployment  Rates - U.S. Census Bureau
  3. HPI - Federal Housing Finance Agency 
  4. Debt-to-income ratio - U.S. Census Bureau
  5. Income Inequality/ Gini Coefficient - U.S. Census Bureau
  6. Average days to foreclosure - ATTOM data solutions


We at Knock wanted to dive into the dynamics behind foreclosures across the country. We analyzed the states seeing the highest percent of real estate owned foreclosure transactions out of all fair market transactions for the time periods of 2010-2019 and 2021. We chose REO transactions as the measure for this analysis, to show the states who have homeowners in the most final steps of the foreclosure process, and where remedies were ultimately not found. To look into the economic conditions of the states experiencing foreclosure we collected data on their; home price index growth, unemployment rates, debt to income ratio and gini coefficient indexes to determine causality over time of foreclosure rates, and how the impact of those dynamics have changed over time. 

Blalock Family: Downsizing Doesn’t Have to Be a Daunting Process

After Michael and Racheal Blalock found themselves with an empty nest, they began thinking about downsizing to a smaller home.

There were excited to start fresh somewhere new, but the idea of selling their house felt daunting. “We didn’t want to get caught up in the fray of showing the home and all the things that come along with trying to sell,” said Michael.

So when Michael stumbled upon Knock on his Facebook feed, he and Racheal decided to jump on the opportunity.

The couple met with Stephen Freudenberg, Licensed Local Expert at Knock, and decided that listing would be their best option. That meant getting the house in tip-top shape to maximize offers.

“The house needed some cosmetic repairs and a new roof, so Knock paid upfront to get it done,” Stephen explained.

Within two weeks, the repairs were done and the offers began to roll in. “We had nine offers right away,” Michael said.

When downsizing, timing is everything

While things progressed with the sale of their property, the Blalocks searched for a new place to call home.

They soon found a newly-constructed property that perfectly matched their needs. But, there was just one caveat: The couple was relying on the proceeds from the old house in order to purchase the new home, so the timing had to be just right.

Thankfully, they were in a good position to negotiate. “Because they had a lot of offers, they had a lot of leverage,” Stephen said. “They closed on the first house, had three days of temporary occupancy and then they moved into their new home.”

The Blalocks were thrilled with the way the transaction worked out – especially because their old home sold for more than market value. “It was just a win-win. It worked out perfectly.” Michael shared.

Forming a great relationship

Throughout the process, the Blalocks maintained a close relationship with Stephen and the rest of the Knock team.

It was important to Michael and Racheal that their team was paying attention to their wants and needs, and didn’t see them as just another sale. “[Working with Knock] didn’t feel cold like it would with a big corporation. It actually felt like they cared.”

And the Knock team truly did. Just days before closing, Stephen and his wife were on their way to Thailand for a leisure trip. Despite being time zones away, he kept the ball rolling for the Blalock family. “I was on a layover in Istanbul and on the phone with the buyer agent to make sure everything was running smoothly,” Stephen said.

The family appreciated the effort. “We consider [the Knock team] a part of our family because they were just that close to us and had our best interests at heart,” Michael said.

Ready to start fresh in a new home like the Blalocks? Submit your current home for a free market price estimate today.

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