The Covid-19 pandemic and ensuing economic downturn is already reminding some realtors of the Great Recession. Back then, so-called 'zombie foreclosures' became commonplace due to the decline in the real estate market, and now the phenomenon is happening again. "Zombie foreclosure is just a fancy way of referring to a house in foreclosure that is sitting vacant, and has been sitting vacant for some time," says Mark Bloom with Networth Realty.
It's still too early to know the full effect of the Covid-19 pandemic on the housing market, but realtors in the Houston market were already nervous last month. Now, a new report shows the number of zombie foreclosures nationwide rose by 3.1% during the first quarter of the year, to a total of 8,700 homes. "You are seeing foreclosures start to uptick, and you are seeing an increase in the number of houses that are sitting vacant in neighborhoods, and that doesn't really do any good for the people in that neighborhood," says Bloom. "If you get an inordinate amount of those vacant properties that are just sitting there, becoming overgrown and not being maintained properly, it can hurt the (property) values in certain neighborhoods."
Because these 'zombie' properties are often in poor condition, they rarely can be sold to traditional buyers. Instead, vulture investors a.k.a. 'zombie hunters' often circle. "These properties in many instances, if not most, are going to sell to an investor or some kind of a hunter for these types of properties," says Bloom.