U.S. Foreclosure Discounts Return With a Median 27% Price Cut – What Investors Should Know

The US foreclosure market has begun to normalize off the historically low levels seen during the pandemic pause in foreclosures, with Foreclosed homes currently for sale by owners at a median discount of 27.2% or the largest discount chance of any type of home for sale in the current constrained housing market.

Number of U.S. Homes for Sale Listed as Foreclosures Hits 6 Year High at 1.3% of Market in April 2026. The number of homes listed for sale as foreclosures reached a six year high in April 2026 at 1.3% of total listings, or about 94,000 homes for sale. The large increase in the number of homes listed for sale as foreclosures is attributed to the expiration of many of the mortgage relief programs put in place during the pandemic in 2024. Homeowners who purchased homes at the peak of the housing market prior to the pandemic are now struggling to make their mortgage payments as well as pay for rising insurance, taxes and home maintenance.

Unlike the 2008 mortgage crisis, where falling home values and low quality mortgage lending caused an increase in the number of foreclosure listings on the market, the current rise in distressed property listings is mostly a result of the usual and typical process of a foreclosure in a slowly depreciating housing market after a pause in the flow of previous years’ delinquent inventory due to mortgage relief programs put in place during the COVID-19 pandemic.

On the other hand, real estate owned (REO) properties, which are repossessed by lenders after a failed auction, can offer buyers a pathway to purchase a home at a lower market value. The discounts realized from REO properties have historically fallen between 20% to 35%, and lately, REO properties have been selling at a discount of around 27.2% following the slowdown in home prices in 2025 and 2026.

The foreclosure rates are running highest in the very affordable markets. Below the national median priced home, these areas have the highest numbers of properties going through the foreclosure process. Several of the distressed sales in the higher numbers of REO listings have been from the state of Alabama. This is for two reasons. The first is that auctions in Alabama have risks for the bidder that are higher than normal. The second reason is that the lender can have the former owner of a property that has gone to foreclosure redeemed, and then the property would be sold as a REO listing instead of going to auction.

When considering distressed homes for sale, home buyers should understand the pros and cons of buying foreclosed homes for sale. By nature of the situation, homes in the REO market have less marketing information, are sold as-is, and often have additional repair expenses associated with the home. Even with 26.5% more online views than average listings for sale on the market, homes in the REO listings typically take 11 days longer to sell than comparable properties for sale on the market. This added time for home inspection and to assess needed repair costs could dissuade some home buyers, especially those that are new to home buying or buying homes for sale in the distressed market.

Some potential buyers of distressed properties are hesitant to purchase these homes because they are unsure of what kind of shape the home is in and they are unaware of potential expenses the buyer may incur after purchase. REO’s have 26.5% more online views than average listings for sale and although they typically remain on the market for 11 more days than average listings for sale, the buyer who is willing to wait will be rewarded with a great purchase at a below market price.

What This Means for Your Portfolio:

1. If you are an investor willing to rehabilitate a property and are willing to go through a typically less-efficient buying process (such as with a distressed REO), then the typical 27% or so of median price lower selling price for the average REO listing can provide a nice buffer against volatility in local residential real estate values.
2. Invest in distressed sales in affordable metros with elevated foreclosure rates but research the relevant local laws i.e. the investor in Alabama needs to be aware of the redemption rights that were left on former owner of foreclosed properties that were sold at auction.
3. Factor in increased time on the market and limited listing information and be sure to allow sufficient time for and budget for required inspections and needed repairs.
4. Use financing with a lot of due diligence when evaluating a home that is distressed, as it typically can qualify for a typical mortgage with a lot of attention paid to the physical attributes of the home and potential repairs.

The current wave of US properties heading down the foreclosure path does not automatically translate to crisis. Rather, they are a natural response of the market to temporarily disturbed dynamics after the pandemic and an ensuing period of relieved mortgagees. Value-aware and, above all, risk-tolerant investors might find in the offers of the distressed inventory something that can bring considerable value, for example, in real estate markets that are characterized by high price tags and strict to get. Moreover, distressed sales bring back affordable housing to the market, which in today’s terms is worth its weight in gold. Naturally, the process of finding and purchasing a home with a history of distressed sales requires much more patience, different approach and also huge amount of caution, due to potential financial and time-consuming traps, waiting to get the best of inexperienced investors.

Just as housing markets around the world are coming to terms with the pandemic era’s distortions in the housing market, distressed inventory is returning to the U.S. marketplace in quantities not seen for many years. So what do these numbers mean for Dubai-focus investors scanning for property opportunities around the world. Are these return to distressed inventory something to be worried about or merely another aspect of the global real estate market that they must factor into their risk tolerance and broad-based property market diversification strategy.