Daren Blomquist on the rise of distressed property auctions

HousingWire

On today’s sponsored episode, Editor in Chief Sarah Wheeler talks with Daren Blomquist, vice president of market economics at ⁠Auction.com⁠, about the rise of distressed property auctions in the second quarter and what that means for the overall housing market.   Related to this episode:   ⁠Get the latest auction marketplace data from the Auction Market Dispatch⁠  https://www.auction.com/lp/auction-market-dispatch/  ⁠See how auction buyers are transforming neighborhoods on Auction.com⁠  https://www.auction.com/lp/in-the-news  ⁠Visit Auction.com to browse and bid on foreclosure and REO auction listings⁠  http://www.auction.com/  ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q  ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠   The HousingWire Daily podcast brings the full picture of the most compelling stories in the housing market reported across HousingWire. Each morning, listen to editor in chief Sarah Wheeler talk to leading industry voices and get a deeper look behind the scenes of the top mortgage and real estate stories. Hosted and produced by the HousingWire Content Studi

Transcript

00:00Welcome, everyone. My guest today is Darren Blomquist, Vice President of Market Economics

00:11at Auction.com to talk about housing market trends, including the rise in distressed property

00:17auctions in the second quarter. Darren, welcome back to the podcast.

00:21Thanks. Good to be here, Sarah.

00:23Great to have you as always. I always look forward to these because I feel like there

00:28is so much insight that you guys get at auction where you can really see into a part of our

00:35industry and what's happening in a way that other data doesn't really tell us. So super

00:40excited to jump in. Yeah, thanks for that. And I love our data as well. So I'm glad that

00:46I have a mutual appreciation. You have a mutual appreciation for it.

00:52Absolutely. Well, let's get started with sort of the broad outline is like the number of

00:57distressed property auctions has been rising, right? So maybe you could walk us through the

01:02increase and what it means for the housing market from your perspective.

01:06Yeah, absolutely. In the second quarter of 2025, which is our latest data, we saw actually our

01:12foreclosure auctions as well as our bank owned or REO auction volume. Those both increased about 20%

01:19from a year ago. And both of those are now at about a two year high. And so that stood out to us.

01:26And that was it was pretty broad based across pretty much every loan type, not just FHA VA loans,

01:34although VA loans spiked a lot. And we can talk about that if you want to. But kind of for some

01:40different reasons. But it was it was pretty broad across all loan types. And then it was also pretty

01:46broad based across most markets, many markets across the country. And although it was definitely we saw

01:53some bigger increases in places like the southeast and the Sun Belt. So places like Phoenix, Houston,

02:01Dallas, Atlanta, all saw some some pretty big increases above the national average.

02:08And so what that's telling me is that there is this the softness that we're seeing in the retail market

02:14is is also rippling out to the distressed market and kind of vice versa. It kind of acts as a vicious

02:23cycle, unfortunately, where some of the weakness in the retail market means that homeowners who are

02:30facing foreclosure or facing delinquency don't may not have as much equity or as many options as they did

02:38before to avoid foreclosure. And so they're moving into foreclosure and actually going to the the

02:45foreclosure auctions. And then as we see more volume there, unfortunately, that that's going to put more

02:51pressure on the retail market as well. And and potentially put more pressure on home prices,

02:58which then you have that vicious cycle. Now, I don't want to overstate things. But I think

03:03and one way to not overstate things is to point out even with this two year high in foreclosure

03:09auction volume, we are still about 50 percent of pre-pandemic levels of 2019 levels at the foreclosure

03:17auction stage. And then if you look at those REO or bank owned auctions, we are at about one third of

03:23the pre-pandemic level. I appreciate that context. I was just going to ask you like 20 percent sounds like

03:30a lot. And is that a lot or was it just that we were coming off such a low level?

03:35Yeah, it's it's really more of the latter. We're coming off of such a low level.

03:40So we're seeing some of those big increases, but we're still well below that 2019 level,

03:46which even at the time was not this overwhelming high level of foreclosure activity. So I do want to

03:54definitely put this in context that this is not the beginning of another 2008 or anything to that

04:01extent. So I am surprised to see it so widespread. Like normally we can kind of say, oh, we're seeing

04:08it in this area or these kind of localities. And but to see it kind of widespread and also across

04:16different loan types, I think is unusual. Yes. Yeah. I mean, I think the the the common conventional

04:23wisdom over the last few years has been, well, the FHA and VA loans are the the most susceptible

04:30and the most at risk for foreclosure and for good reason. And we're seeing bigger increases in those

04:36loan types. But we're also seeing increases in conventional loans. And so I think that's what

04:43that's telling us is that this is it is not just about the the the this the slightly riskier loan type

04:52that we're seeing with FHA. But it's also about some of the market conditions that we're seeing

04:57that's putting more pressure on on consumers. And, you know, we were seeing this trend in in

05:04in other types of consumer debt over the last few years develop. And it's finally I think

05:10what we're seeing now is this finally rippling out to mortgage, which mortgage was somewhat insulated

05:15because homeowners had so much equity. But the the increases that we saw, for instance,

05:21credit card delinquencies and auto loan delinquencies that have been that trend has been happening

05:27now for the last couple of years. We're seeing that now more more obviously happening in in the

05:35mortgage and mortgage delinquencies. So let's dig into what you said about VA loans and what you think

05:42some of the particulars there are. Absolutely. I mean, we saw I mean,

05:46and I almost hesitate to say this number because it I don't want it to be misconstrued, but we saw the

05:52VA completed foreclosure auctions go up by 428 percent year over year. And, you know, whereas you

06:00you had that 20 percent increase across the board. And the reason for the VA loan increase is because

06:06there was a foreclosure moratorium on VA loans in 2024. So basically you had next to no completed

06:15foreclosure auctions for VA loans in 2024. So we're coming off that extremely low level. And that

06:21moratorium was lifted at the end of 2024. So now some of those properties that would have gone to

06:27foreclosure auction in 2024 or just move have just been pulled back and pushed into 2025. So that's the big

06:35reason. But we are still, you know, you're still seeing increases, like I said, across the board FHA

06:40loans, but it's more like high single digits to low double digits where we're seeing increases in those

06:47other loan types. I should mention the only loan type where we did not see an increase was USDA loans.

06:53Those are actually down on a year over year basis. Do you have any explanation for that?

06:58Actually, I don't. In terms of the USDA loans, I think, yeah, we haven't dug into that. And it is a

07:06pretty small percentage, as you might imagine, of the overall volume. The biggest pieces of the volume

07:13are GSE loans, which account for about 33 percent of the foreclosure auction volume that we have,

07:20and FHA, which is about 30 percent of that volume.

07:23Well, let's talk about prices, right? Because this is something that we can really see trends in.

07:29The distressed property auctions have seen prices lowering.

07:32So what do you make of that? And what does that mean for the broader housing market?

07:37Yeah, absolutely. So, I mean, I think this is an extension of the fact that we're seeing the volume

07:42increase and the retail market, you know, softening. When I say softening, I'm talking about the increases in

07:48inventory and the pressures that's putting on home prices and home price appreciation, at least in some

07:54markets. And so what we're seeing with pricing at foreclosure auction is that our buyers who are

08:02purchasing at foreclosure auction are willing to are building a bigger margin and wanting a bigger

08:08discount. So a year ago, they were willing to pay 60 cents on the dollar at the foreclosure auction,

08:15which is, you know, a great discount. But so that's basically a 40 percent discount. And I, you know,

08:22just to contextualize that a bit, that is off of the after repair value of the home. So a lot of these

08:30homes are in pretty bad shape, in pretty distressed shape. And so you're getting a 40 percent discount

08:37off of that home if it were in fully repaired, renovated condition. So just to, just to clarify on that,

08:46because we always get questions about that. But so they're, they're willing to pay 60 cents on the dollar

08:51a year ago. Now they're willing to pay 57 cents on the dollar. So they're, they're building in a three

08:57cent bigger discount. And that may not seem sound like much, but that is an indication to us that

09:05these buyers are not confident in the retail market where they're buying that, that those retail markets

09:12are going to recover anytime soon. And they're, they're continuing to see weakness in their local

09:18markets, which is why they're building in those bigger margins for the, for when they're buying that

09:25distressed auction. And so that's, to me, that points to continued weakness in the retail market.

09:32Because most of these buyers, we call them local community developers. They are, they're very aware,

09:39hyper aware of their markets. They know their markets like the back of their hands. And so usually

09:45they're right. I mean, usually if they think the market's going to be weak over the next three to six

09:50months, the market is going to be weak. And, and this pricing component is, is signaling that those,

09:58at least in many markets, that those that our buyers think that their local markets are going

10:04to continue to have weakness probably through the most or the most of the rest of 2025. And I should

10:10mention that it was, we saw this phenomenon of a lower pricing at auctions in 57 out of 80 metro areas.

10:18So it is pretty widespread as well. Some of the biggest decreases were, again, in this,

10:25in the Southeast and Sunbelt. So San Antonio, Riverside, California, Miami, now a couple exceptions,

10:32Detroit and Indianapolis also saw pretty big decreases. And then Houston and Atlanta. So it was,

10:38it was pretty widespread, but the bigger decreases that we saw tended to be

10:42in some of the markets that are seeing big increases in retail inventory. And so our buyers are a little

10:48bit more cautious in, in those markets. I think your point about those local

10:52market developers is so, um, is so important. Um, they're also the people who are, it's usually

10:59they're putting their own money up. So like, they're very, they're very good at what they do.

11:03Otherwise they wouldn't be in business, right? Like they have to know those local markets so well,

11:08or else they're not going to be in business long. So I think that's, that's really interesting.

11:12Yeah. I mean, I think just to hit home on that point, cause I love that you said that is that

11:17these, in order to be six, their success hinges on them accurately anticipating market conditions

11:25in the future. And they're putting down usually at these foreclosure auctions or bank owned auctions,

11:29they're putting down cash. It's not even their own cash. And so, um, they have to be good at what

11:36they do or else they will not continue to do it. Great points. Well, let's talk about,

11:40you know, um, so I thought this was really interesting. The market's also seen an increase

11:44in the number of vacant property auctions. What does that mean? And, um, why tell me why you have

11:51a vacant property auction instead of, uh, like, why is it classified that way? What does that mean?

11:56Yeah. Yeah. We thought this was really interesting, uh, for a few reasons, but we saw specifically

12:02vacant properties that are bank owned. So those are the REOs or real estate owned properties.

12:08Those increased by 31% year over year to a five year high. So overall we were up 20% to a two year

12:15high. Those vacant auctions were up 31% to a five year high. So really going back to almost pre pandemic

12:21levels. And, um, I actually think this is really good news on, on a couple of fronts because you're

12:29basically clearing out inventory of unused housing inventory. These are properties where it's been

12:35foreclosed on the bank now owns it. A lot of times the homeowner will stay in the property for a

12:40while, but these are instances where the homeowner, the former homeowner has left the property is

12:45sitting there vacant. A lot of times it's falling into disrepair. There's deferred maintenance.

12:50It's a little bit of a blight on the local neighborhood. It's dragging down local surrounding

12:55home values. And so this increase in these vacant auctions is actually assigned to me that we're

13:00clearing out some of that, that unused inventory. And that inventory is going to get converted into

13:08supply for the housing market and often affordable housing supply, because these are properties,

13:1340% of our, our properties that, that go through auction.com are in areas under, uh, classified as

13:21underserved neighborhoods. So either low income or minority in neighborhoods. And so we're providing

13:30more supply in these neighborhoods. Uh, and so that's a really good, good sign for me. Number one,

13:36number two is that we see with the vacant properties, it's more likely that we actually see

13:42an owner occupant buyer, as opposed to an investor, um, who actually buys off of auction.com.

13:48Because when the property is vacant, they don't have to deal with eviction, uh, which is a, you know,

13:53kind of a big deal, uh, a possible eviction, or at least dealing with the current occupant of the

13:58property. Uh, and so those are more appealing to the owner occupant buyers. Uh, and so that would mean,

14:06in fact, we saw in so far this year, 20% of our REO auctions, those, those bank owned auctions are going

14:13to owner occupant buyers and that's up from 19% last year. And back in 2017, only 5% of those REO

14:21auctions were going to owner occupant buyers. So I think good news on a couple of fronts and I can,

14:27I can talk about this longer if you want, but I think there's, um, there's a lot of evidence that

14:33this is actually going to be good providing affordable housing supply for the housing market.

14:40And it, it pushes back on this. I think it also pushes back on the narrative that these investors

14:47are coming in there and just snatching up all these properties, uh, and somehow taking that away

14:54from the market. These investors are actually putting these, these properties back into circulation,

15:00uh, in the housing market.

15:01This is such a perennial question we get or comment that I get. Um, because I do the, uh,

15:09podcast all the times people will be like, there's all these vacant homes out there. There's just like

15:13millions of vacant homes and we just need to free them up for, um, you know, people who want to buy

15:18them. And it's hard to know what that, what that means. Some of the vacant homes in this country are

15:23because they're just like, they're falling into, I mean, you'd have to start over or they're in places

15:28where there's very little opportunity. You could buy that house. Yes. For what kind of job are you

15:33going to get out there? There's no services, whatever. So I think it's really interesting that

15:37you're seeing vacant houses, you know, selling. And, and like you said, what that actually means

15:43for that community, what it means for supply. I love that.

15:46Yeah. I mean, one of the implicate, one of the unintended consequences of all the,

15:52there was a lot of government help for, to help people avoid foreclosure during the pandemic,

15:57which was good to, to avert some kind of a catastrophe. But one of the unintended consequences

16:05of that is that you did have these properties sitting in foreclosure longer and more potential

16:11to become vacant. Now I'm not proposing here that we're talking about millions of properties by any means,

16:16but we're talking about thousands of properties per quarter that are potentially in this, in this

16:22situation. And one of the data points I looked at is the average time these properties have been bank

16:31owned when they are, when they are sold at auction. And so far this year, those properties have been in

16:38bank owned for about 345 days, which sounds like a long time, but that is way down. Back in

16:462021, the vacant properties that were being brought to auction had been bank owned for an average of

16:541500 days. So you have these properties sitting around vacant for a long time. And now we're at

17:01least working through those. And so the average time is, is down quite a bit to 345 days.

17:07When I, when I joined Housing Wire in 2013, so much of our, uh, coverage was about, you know,

17:14uh, REO, right? Bank owned properties and how to, how are you going to maintain them? And how are you

17:20going to, you know, all their property preservation companies, because it was years and years that those

17:24had been sitting there. And, uh, so I had no idea it had gotten as, as long as that, even in, uh,

17:31before the pandemic. Yeah. I mean, part of that, that number spiked during the pandemic,

17:35just because there was a foreclosure moratorium. So there wasn't new inventory coming through,

17:41but still, I think there was this, uh, this, you know, just unfortunately an unintended consequence of,

17:49of that, that moratorium and the foreclosure prevention efforts that caused some of these

17:53properties to be sitting around a lot longer. And now I think we're getting more of those back into

17:59circulation, which is a good thing. It is a good thing. Okay. Well, I wanted to ask you about the

18:05so-called big, beautiful bill, right? Um, that passed, uh, because it had a portion dedicated to

18:11changing opportunity zones and would love to ask you, you know, from your perspective and what you

18:16guys look at, how are the opportunity zones changing and what does that mean for the overall

18:20market? Yeah. I love this because I feel like it's an opportunity to tell the story of, of what

18:28our buyers are doing in, in the communities and they're doing to me, they're providing a blueprint

18:34for how, how the opportunity zones can help communities, help, help revitalize communities.

18:42And so, and I, I think, you know, I'm not commenting on the whole big, beautiful bill, but the portion

18:48that has to do with, uh, these opportunity zones is very good because it's really,

18:52it's, it's targeting closing some of the, I guess, for lack of a better word loopholes in the original

19:01opportunity zones that, that made it. So not all the opportunity zones were really underserved areas.

19:08And so it's really focusing in on these areas. These neighborhoods have to be truly underserved,

19:14low income. They can't just be next to low income areas. They need to be, uh, in low income areas.

19:20And, and it's also requiring that, uh, one third of all the opportunity zones in each state

19:26are in rural areas. And, uh, I think that's, that's really a good idea because we see a lot of the

19:33properties, um, that are, we, we're, we've actually seen a pretty big increase in properties

19:39that are going to foreclosure auction in rural areas. And so there is more distress. There did,

19:44tends to be more distress in these rural areas. And so focusing there, I think will help, um, revitalize

19:51these, uh, rural areas as well. What we see is, um, so when we look at the auction.com buyers of the last,

19:59since 2018, when the original opportunity zones were put into place, auction.com buyers have

20:05actually purchased 80,000 properties in underserved neighborhoods as defined by the FHFA and 36% of

20:16those are in rural areas. And so, um, I think our, our buyers are already on this train and the

20:23opportunity zones will only help bring more, uh, investment to some of these underserved areas

20:31and, uh, and really improve. And we do see that these markets are actually helped when you have an

20:38investor coming in, buying distressed properties, renovating them and turning them over to homeowners,

20:43um, that, that helps not just that individual property, but the surrounding neighborhood and

20:50home values and even provides jobs in that area. And so I think this is going to be a good thing

20:56to revitalize some of these communities. I, I mean, I talked to one, um, one of our buyers recently,

21:03uh, Lindsay Davis in Birmingham, who's already been doing this. And I just love what she had to say.

21:08Um, cause I mean, they've been buying homes in Birmingham and most of them

21:13are, uh, let's see 49%. I looked at her, her purchases, 49% of the homes, her company

21:21bought in Birmingham are in these underserved neighborhoods and 39% of those that she's

21:29that in those underserved areas are in rural areas. So she's already doing this. Um, and she just,

21:37and she's already making a difference. And so I think the opportunity zone

21:41will attract more investors like Lindsay. Uh, what she said is, um, renovated homes lead to

21:50increased property values, extended tax bases, and higher rates of occupancy. Each renovation

21:55project supports dozens of local jobs from contractors to suppliers, along with encouraging

22:01further private investment in areas that have long been overlooked. Uh, this kind of grassroots

22:05development proves that opportunity zones expansion can be a powerful tool for neighborhood

22:09revitalization. I love that. I also talked, I wanted to mention this Sarah, because I know we both have

22:15a Wichita connection and we see, um, I talked to a, one of our buyers in Wichita, Kansas and who's doing

22:23this. And he said, you're resurrect, you're resurrecting things. A lot of times assets that are just dead.

22:29Um, and he's, he's doing that in Wichita, which I love, which is because it's my hometown. Uh,

22:37but that's, that's the kind of thing that gets me excited that there's some policy that's actually

22:43going to encourage what we already see some of these local investors doing.

22:47I also think I follow a ton of developers on social and, and what you see a lot of times with their strategy

22:53is like they are buying within a certain block radius of their other properties because they know the

22:59area, but also they're improving the area of what they have. And so if you think about the difference

23:05that buying and rehabbing a home, um, two, two homes within a two block area that were vacant or were,

23:12you know, needed to be revitalized, you've just raised the property values of that whole area,

23:18right? That's what they're trying to do because that's good for their business, but it's good for

23:22everybody who lives in that neighborhood. Yep. Yeah. I mean, I love, you know, this phrase might be

23:27overused, but I really think these, these buyers are a good example of doing well by doing good.

23:33I mean, to keep going, they have to be making a profit and making money, but in the process,

23:38they're actually lifting all the boats in, in, in their neighborhoods.

23:43Um, you know, we published a story, it was by Logan, um, last week and it said, you know,

23:48why we should be cheering the mom and pop investors. And it's, it's sort of like what you're talking

23:53about here because it's like, you know, so much of the conversation is like, oh, the investors are

23:58coming in and, you know, wall street and they're buying all the homes, they're pricing people out.

24:01And, um, you know, we know that that's the, the majority of, you know, home investment of,

24:07of these kinds of things are mom and pop investors. Yeah, that's right. And, you know, and there's

24:13certainly bad players out there, but I think the vast majority are the, are the good players. And we actually,

24:21we kind of self selected on the auction.com platform because, because foreclosure volume

24:26is not like it was in back in 2013, where it was just overwhelming the market. Um, that's when you

24:32saw some of the big black stones of the world come in and say, oh, there's enough volume at foreclosure

24:36auction that we might want to buy, but they're not, there's not enough volume actually, to be honest,

24:40there for them to, to be interested, uh, to buy at foreclosure auction. And so it is,

24:46uh, the vast majority of our, our buyers are these smaller local investors, mom and pop investors.

24:55What do you, um, you know, just to finish this out, what are you looking for, um, the rest of 2025?

25:00What are some things that you're watching as you look at your data?

25:03Yeah, I think, you know, what we're seeing here with, with the increase in foreclosure auctions,

25:09you know, I don't want, you know, people, people might take that and become alarmed with it. I think,

25:13uh, what it is, is, is it kind of a reversion to the mean? I mean, we're seeing the market normalize

25:20and part of that is normalized foreclosure volume, which were again, we're 50% below 2019 levels,

25:27which if I would consider 2019, the closest to normal that we've seen in quite some time.

25:32So we're seeing a reversion of the mean, um, right now, there's not an indication that we're going to

25:37see a big wave of distress hit, um, unless there's some additional shock to the system

25:44that would, you know, to the economy or to the housing market that would cause that.

25:48But right now it's more of this reversion of the mean, which, which results in

25:53a rising tide of foreclosure auctions, but certainly not a massive tsunami or wave of foreclosure,

25:59foreclosures that are, that are coming down the pike.

26:01And to your point, I mean, there, this is a sign in some ways of a healthy housing market,

26:07because it means we're, we're, we're getting those, uh, vacant properties out. There's more

26:12selection for people, um, just returning more to, to more normal. So that's really interesting.

26:18You know, I think there's a lot of things that, that good, that were good that came out of the

26:24response to the, that pandemic crisis, which you now have a lot of things in place to protect

26:31homeowners who are facing foreclosure that were not in place before the pandemic. And those are,

26:36you know, those are still in place. And that I think we're giving homeowners who are in, in trouble,

26:43every opportunity to avoid foreclosure, uh, as well, but you have that in combined with it.

26:48There's a certain point where it may be the best in their best interest to, um, to walk away from that

26:55home. And when I say walk away, I mean, actually sell it proactively prior to foreclosure. And

27:01that's, um, that's one of the things you didn't ask about, but I'll throw it in there as a shameless

27:08plug that we're now doing, or we're now allowing individual homeowners on our platform to not just

27:14banks to post their properties for sale, uh, which we think will help those, those distressed homeowners

27:20as well. This is so interesting, especially in the light of the bigger, what we call portal wars

27:27about where people are able, like just in, you know, on the retail side, where people are,

27:33are able to post their, um, listings, um, you know, the different companies and how they're deciding to

27:40hold those back or not. Anyway, very interesting that you guys are doing that.

27:43Yeah, just a small, small part of that. But yeah, we want to enable, especially distressed homeowners

27:49who a lot of times they're in a situation where they can't do, they don't want to, or it's very

27:54hard for them to do showings of the property. And they also may be in situations where they need,

27:59they want to lease back the property for a while, for instance, after the purchase. And our buyers are

28:05very accustomed to those types of situations. And so our buyers are used to dealing with those kind of

28:11out of the box type of purchase situations. Amazing transparency to just help the market.

28:17So Darren, thank you so much for being on. I always learn a ton and I think it's just

28:21super interesting. So thank you. Thanks, Sarah. Appreciate it.

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