🚨 Where Credit Stress Becomes Inventory
Foreclosures, REOs, and price cuts are rising together
Consumer delinquencies climbed to their highest level in nearly a decade as household debt continued to rise, and that pressure is now moving through the housing and credit system.
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Foreclosure filings are up from a year ago, and a growing share of those cases is already converting into bank-owned homes as REO inventory surged at the end of 2025.
At the same time, the share of seriously underwater mortgages is edging higher, while office CMBS delinquencies have pushed to a new all-time high.
Even with easing mortgage rates, home sales fell sharply in January and homebuilders are stepping up price cuts as affordability strain and weak demand reshape the market.
Here’s where growing delinquencies are moving from credit reports into foreclosures, bank-owned homes, and discounted listings.
In this edition of the AltReports:
📉 Delinquencies Hit High
🚨 Foreclosures Keep Rising
🏦 REO Supply Surges
🌊 Equity Slips Underwater
🏢 Office Defaults Climb
🏠 Sales Stall Despite Rates
💸 Builders Cut Prices
Video of the Week: 1.5 Million Homeowners Falling Behind-Why It’s Happening now
Chart of the Week: Multifamily Delinquencies Rise Again
Podcast of the Week: Delinquencies, Defaults and Investor Positioning in 2026
Consumer Delinquencies Hit Decade High
Household debt hit $18.8 trillion while delinquencies climbed to their highest level in nearly a decade.
Stress is building across credit cards, auto loans, student debt, and mortgages, with 58,000 new foreclosure notations added in Q4.
Foreclosure Filings Jump 32% Year Over Year
Foreclosure filings rose 32% year over year, with completed foreclosures up 59%.
Delaware, Nevada, and Florida led activity for the 11th consecutive month as rising ownership costs push delinquent borrowers into the foreclosure pipeline.
Bank-Owned Homes Surge as Distress Converts
REO inventory surged 53% in December and nearly doubled year over year.
Florida, California, Ohio, North Carolina, and Texas saw the sharpest increases as earlier foreclosure filings convert into lender-owned supply.
Underwater Mortgages Are Rising Again
Seriously underwater homes rose to 3% of mortgaged properties in Q4, up from both the prior quarter and year earlier.
Equity cushions are thinning in multiple states as the trend reverses from recent lows.
Office CMBS Delinquencies Hit New High
Office CMBS delinquencies reached an all-time high in January, pushing the overall rate higher.
Multifamily and retail also climbed, showing commercial credit stress extends beyond offices.
Home Sales Fall Despite Lower Rates
Existing-home sales dropped sharply in January even as mortgage rates fell to their lowest level since late 2022.
The West saw the steepest decline, signaling affordability strain persists regardless of financing conditions.
Builders Cut Prices to Keep Deals Moving
Nearly 1 in 5 new homes carried a price cut in late 2025, making new construction more likely to be discounted than resale inventory.
Cuts are concentrated in the South and West as builders compete on price to move elevated inventory.