Texas Pre-Foreclosure Rates Drop Sharply in May 2025, But Economic Hardship Persists for Struggling Homeowners

A State in Recovery—But Not for Everyone

In Texas, where suburban expansion and economic opportunity have long defined the state’s identity, foreclosure threats tell a more complicated story. The headline numbers for May 2025 offer cautious optimism. Pre-foreclosures in the state dropped sharply to 1,983 properties, marking a 38.55% decrease from the 3,227 cases reported in April 2025, and a 21.57% drop from the same period last year. Those are meaningful improvements on paper, a welcome turn after months of rising stress signals in the housing market.

Yet behind this encouraging data, a deeper reality continues to unfold—one in which vulnerable homeowners, particularly low-income families, teeter on the brink of financial despair. Beneath the statistical improvements lies a Texas still reckoning with inflation fatigue, worsening affordability, and a lopsided economic recovery that has not touched all communities equally.

From Financial Crisis to COVID—and Back Again: A Long-Term Look

Foreclosure activity in Texas has always mirrored the broader American economy, though sometimes with a Texas-sized lag. Starting in the early 2000s with negligible housing distress (just seven pre-foreclosures in 2004), the state’s numbers exploded during the 2008 financial crisis, peaking at 176,689 pre-foreclosures in 2010. While economic stabilization and tighter lending rules helped bring numbers down gradually during the 2010s, it wasn’t until the federal moratoriums during the pandemic that Texas saw pre-foreclosure activity plummet, dropping to just 809 in all of 2021.

But the relief was short-lived.

Since those artificial lows, the market has returned to something resembling its pre-pandemic form. In 2023, Texas recorded over 67,000 pre-foreclosures, with 2024 and now 2025 year-to-date (at 14,416 cases through May) appearing on track to meet or slightly exceed those levels.

The trend signals a steady “rebalancing” of the housing market, but for residents like Michelle Torres, a school cafeteria worker in Austin, that word provides little comfort.

“There’s nowhere to go but up—for prices, I mean,” Michelle said, standing in the doorway of her modest two-bedroom rental. After her landlord notified her in February that the home would be listed for sale, Michelle has been scrambling to qualify for any sort of mortgage. “I have a steady job. I take care of my daughter. But nothing pencils out anymore. Rent, groceries, gas—everything eats up the paycheck before I even see it.”

Structural Challenges: Affordability, Wages, and the Limits of Resilience

At the heart of Texas’s housing stress lies a familiar and stubborn set of issues: rising housing costs, stagnant wages, and inflation rates that have only recently softened after two punishing years for working-class households.

While Texas has long promoted itself as an affordable state, that identity is fading. Home prices in major metros like Dallas, Austin, and Houston have risen faster than wage growth for nearly a decade. And even in smaller cities and rural areas, the lingering effects of supply chain disruptions and post-pandemic building slowdowns have meant fewer affordable homes on the market.

For homeowners on adjustable-rate mortgages or those facing job instability, the pressure builds quickly. And while mortgage interest rates have slightly improved compared to their peak in 2023, they remain above 6%, still historically high enough to limit access to affordable monthly payments for many Texans.

“It’s heartbreaking,” said Lewis. “People are not being foreclosed on because they gambled speculatively—they’re defaulting because life has become unaffordable.”

Conclusion: Stability Gains, But Inequity Lingers

The numbers for May tell an optimistic story on the surface: fewer foreclosures, tighter controls, improving lender flexibility. But these gains mask deeper inequities and point to a housing environment still deeply hostile to low- and middle-income homeowners.

Texas has weathered mortgage storms before, but each recovery has left more hardship in its wake for those without safety nets or support. The coming months will be a critical test of whether May’s decline in pre-foreclosures marks the beginning of a sustainable turnaround, or just another momentary dip in an increasingly precarious market.

Without targeted intervention, empathy from financial institutions, and broader economic support for those left behind, those 1,983 homes at risk this month could just be the beginning of another wave.