The Rise and Fall of Pre-Foreclosures: A Fragile Housing Market in 2024

The numbers tell a story—one of financial strain, cautious recovery, and an uncertain road ahead.

In June 2024, 382 homeowners in Alabama received the dreaded notice that their property had entered pre-foreclosure. That’s seven fewer than last month, marking a 1.8% decline from May 2024. But the more telling figure is the annual comparison. Just a year ago, 454 homes were in the same difficult situation—a 15.9% drop compared to June 2023.

On the surface, these numbers might look like progress. People are keeping their homes. However, across kitchen tables and inside bank offices, the stress remains palpable. Behind each statistic is a family wrestling with rising costs, job insecurity, and a housing market that remains brutal for anyone skating the edge of financial stability.

The Burden of Pre-Foreclosure

For many, the move toward pre-foreclosure is slow and crushing. The average homeowner doesn’t miss a payment all at once. Instead, expenses quietly pile up. A missed check here, an unexpected medical bill there. Suddenly, wages can’t stretch far enough, and the bank is threatening to take the house.

This is exactly what happened to Maria Chaney, who has lived in Montgomery for nearly two decades. She and her husband purchased their home in 2006, riding the optimism of the mid-2000s housing boom. However, after a job layoff and rising mortgage rates, they’ve fallen three months behind on payments.

“If it was just the mortgage, we might be okay,” Chaney says. “But it’s everything else—groceries, insurance, gas. It all keeps going up, and our paycheck doesn’t.”

Her story echoes the larger trends. Inflation continues to strain household budgets, and although home values have risen, many struggling homeowners still find themselves unable to refinance or sell quickly enough to avoid foreclosure.

A Decrease, But Not A Victory

Pre-foreclosures spiked dramatically in 2023, reaching 5,036 statewide—the highest total in a decade. In contrast, 2024 appears to be on a better trajectory, with only 2,746 projected pre-foreclosures by September. But calling this a recovery would be premature.

“These numbers are very deceptive,” says James Hollister, a foreclosure defense attorney based in Birmingham. “People always assume fewer foreclosures mean stability. But in reality, many families are just one emergency away from losing everything. The crisis has shifted—it didn’t disappear.”

The data supports that claim. Historically, Alabama saw massive foreclosure spikes in the aftermath of the 2008 financial crisis. In 2010 alone, 22,375 homes went into pre-foreclosure. Those numbers fell over time, but only because the market rebalanced.

2020 saw a new drop, largely due to federal foreclosure moratoriums during the COVID-19 pandemic, pushing Alabama’s total to just 2,067 pre-foreclosures. In hindsight, that number was artificially low.

Once those protections vanished, pre-foreclosures bounced back—though not nearly to the levels seen in the late 2000s. Instead, since 2023, Alabama’s pre-foreclosure trend reflects a broader national issue: housing affordability.

Affordability at the Center of the Crisis

The cost of housing is the linchpin in this entire conversation. While Alabama remains one of the more affordable states in the country, wages have not kept pace with rising costs.

Add to that the effect of rising interest rates, and even middle-class homeowners are feeling the pressure. A family who refinanced their mortgage in 2021 at 3% interest now finds refinancing at today’s 7% rates impossible. For those who bought homes at peak prices, the situation is even worse.

“A lot of people made financial decisions based on the expectation that interest rates would stay low,” says Hollister. “Now that’s changed, and they’re stuck.”

Investors, too, have contributed to the rising costs in major Alabama cities, making homeownership even harder for first-time buyers. As a result, people who would have traditionally bought homes are staying in rentals—putting upward pressure on rent prices as well.

This means that when financial hardship hits, there’s little buffer. A single missed paycheck can mean losing your home because selling takes too long or isn’t an option at all.

What Comes Next?

If the current trends hold, 2024 will have fewer pre-foreclosures than 2023. Will the decline continue? That depends on a lot of fragile variables—interest rates, inflation, and the job market.

Federal Reserve policies will play a key role. If interest rates come down, refinancing could offer some relief to struggling homeowners. If inflation remains high, any gains in home retention might be undercut by rising living costs.

Meanwhile, housing advocates are calling for more local relief programs, arguing that short-term assistance to struggling homeowners could prevent long-term fallout.

For families like Maria Chaney’s, these policies can’t come soon enough. With a foreclosure date looming, she’s desperately looking for ways to keep her home.

“I just need a little time to catch up,” she says. “I don’t want to start over. This is our home.”

For now, Alabama’s pre-foreclosure numbers are trending down. But for the families inside those homes, the fight to stay has never been more urgent.