Auction.com, the nation’s leading distressed real estate marketplace, today released its Q2 2025 Auction Market Dispatch, which shows that the supply of distressed properties available at auction continued to climb in the second quarter of 2025, reaching two-year highs even while demand from auction buyers dropped to multi-year lows, signaling a shift in the distressed marketplace that could have implications for the broader real estate market.
“The interest rates have killed the market,” wrote a Texas-based Auction.com buyer in response to a buyer survey conducted in the second week of July. “My hold time from two years ago was averaging 120 days. Now I have properties that are sitting with over two years on market.
“Existing homes have crashed,” the Texas-based buyer continued. “Homeowners are starting to drop prices to sell homes to ward off foreclosure, which is creating a lower appraised value nightmare for investors.”
Although still well below pre-pandemic levels, the steady rise in distressed volume over the past two quarters will likely put more downward pressure on home price appreciation, already increasingly burdened by the rising inventory of homes for sale in the retail market. Auction buyers as a group are a good barometer of future retail market trends, and the clear pullback in demand from that group over the past year indicates future weakness in the retail housing market.
In the July survey, 38 percent of Auction.com buyers surveyed said that market conditions are making them less willing to buy, unchanged from the previous quarter but up from 34 percent in the third quarter of 2024.
Buyer expectations for future months were more positive, with 37 percent of those surveyed saying they plan to buy more auction properties in the next three months compared to the previous three months. That was up from 33 percent in the previous quarter’s survey.
“I am holding liquid assets due (to) unfavorable and volatile market conditions. Waiting for (the) right entry,” wrote a Northern California-based survey respondent who said market conditions have made him less willing to buy but that he is planning to buy more in the next three months.
Supply growth spanned most loan types on the foreclosure auction front, but Veterans Administration (VA) loans were at the extreme forefront, with a 428 percent annual jump following the sunset of a VA foreclosure moratorium in December 2024.
Rising volume at foreclosure auction naturally rippled out to REO auctions, accelerated by a dipping third-party sales rate at foreclosure auction. The REO auction volume was led by vacant properties, which increased 31 percent from a year ago to a five-year high.
“The rise in vacant properties available to buy at auction is good news for the housing market because it means sellers are clearing out more distressed housing stock that can now be transformed into much-needed housing supply by auction buyers,” said Ali Haralson, president at Auction.com. “It’s also good news for less experienced auction buyers, including even owner-occupant buyers, because these vacant properties are typically more accessible, allowing for interior access and not requiring the new buyer to deal with any current occupants.”
Scheduled foreclosure auction data for future months, along with a rising foreclosure auction completion rate, points to a continued rise in completed auction volume in future months even as demand from auction buyers is dropping in most markets across the country — particularly in the Southeast and Sunbelt.
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