A Fragile Recovery: How Homeowners Are Grappling with Pre-Foreclosure in 2024

It begins with a notice. A letter arrives, marked with unfamiliar legal jargon. Somewhere within those pages, the looming threat is spelled out: their home is at risk. For many homeowners, pre-foreclosure is the first step toward losing what they worked so hard to attain. It is a moment that forces them to do uncomfortable math—stacking mortgage payments against groceries, gas, and medical bills—and an unsettling measure of how much longer they can hold on.

For the past several years, pre-foreclosure cases in Colorado have been on a merciful decline. In June 2024, there were 307 pre-foreclosure properties, a 2.54% decrease from May’s 315 properties. The numbers are even more striking when compared to a year ago—396 homes were in pre-foreclosure in June 2023, marking a 22.47% decline year-over-year. The data suggests that fewer homeowners are finding themselves at immediate risk of losing their homes. However, for those still struggling, the downward trend provides little comfort.

A Decline in Foreclosures, but an Uneasy Future

The broader picture shows a significant decline in pre-foreclosures compared to the housing crisis of the late 2000s. In 2007, Colorado recorded 39,366 pre-foreclosure cases, a staggering reminder of the financial devastation that followed subprime lending and the Great Recession. That number peaked in 2009 at 37,041, mirroring the national crisis where millions of Americans watched their homes slip away. The situation has improved tremendously since then. By 2023, Colorado reported 4,995 pre-foreclosures, a far cry from the tens of thousands just a decade prior.

This year, from January to June 2024, 1,921 homes have already entered pre-foreclosure. If this pace continues, the state could see fewer cases than in 2023, reinforcing a recovery that has been in motion for years. However, to those caught in the cycle, these are cold comforts.

The Weight of Inflation and Rising Costs

For many homeowners, the problem is not just their mortgage—it is every other expense that keeps climbing. Inflation remains a persistent shadow, stretching grocery bills, energy costs, and interest rates. While home values have risen, wages for many working-class families have not kept pace.

Take Patricia R., a single mother of three in Denver. She bought her home in 2018 when mortgage rates were historically low. But when her property taxes and insurance adjusted upward, her monthly payments increased by $400. The squeeze of inflation made things worse—suddenly, groceries cost 25% more, and every trip to the gas station felt like a financial decision.

“I did everything right,” she said in frustration. “I bought a house I could afford. I kept my credit in good shape. Then everything just became… more.”

Like Patricia, many homeowners don’t face foreclosure due to reckless financial decisions but because the circumstances around them changed faster than they could adjust. They make tough choices—opting to skip a mortgage payment to pay for medicine or putting off repairs their home desperately needs. One late payment turns into two, and soon, a foreclosure notice arrives in the mail.

Interest Rates: A New Housing Barrier

Those who hoped to refinance their way out of financial distress have been met with harsh realities. Mortgage rates, after years of historic lows, have climbed back to around 7% for a 30-year fixed loan, putting affordable refinancing out of reach for many. Homeowners who bought at 3% or 4% interest rates now find themselves frozen—unable to sell (because where would they move?) and unable to adjust their payments to fit within new financial constraints.

Anecdotally, housing counselors say they are seeing more cases where middle-class families, those without significant financial safety nets but who also don’t qualify for assistance, are struggling to adjust. The bulk of pre-foreclosures now come not from subprime borrowers, as in 2008, but from everyday workers—teachers, nurses, restaurant owners—who find themselves inching closer to financial failure with each passing month.

A Crisis Averted, But Not for Everyone

Colorado’s declining pre-foreclosure numbers offer relief, but the problem has not disappeared. In some communities, particularly where housing prices increased rapidly post-pandemic, affordability still feels precarious. Rising rent prices continue to burden those on the fence between homeownership and displacement. Fewer homeowners are entering foreclosure, and those who do, face immense challenges in staying afloat.

There are systemic efforts to help mitigate these pressures. Some cities have increased funding for foreclosure prevention programs, offering free legal assistance and financial counseling. Community organizations are pressuring lenders to work with borrowers before initiating foreclosure proceedings. For many like Patricia, who now spends her evenings scrolling online forums about how to negotiate with mortgage servicers, solutions feel distant.

“It’s hard to think about the future,” she said, staring out the window of the home she fought to keep. “I just don’t want to be another statistic.”

There is no doubt that Colorado’s housing landscape has changed for the better since the foreclosure crisis of the 2000s. But as inflation, interest rates, and stagnant wages continue to press on homeowners, the question remains: How many people will fall just short of stability?

For those balancing on the edge, June’s positive pre-foreclosure numbers are no guarantee of security. The numbers are shrinking, but for families like Patricia’s, their battles are still unfolding—one unpaid bill at a time.