Washington’s Pre-Foreclosure Crisis: The Numbers Are Down, But The Struggles Remain

For a moment, the news looks promising: The number of Washington state homeowners at risk of losing their homes declined for the second consecutive month. In September 2024, pre-foreclosure notices—which signal that a homeowner has missed mortgage payments and is at risk of foreclosure—totaled 269, a 4.27% decrease from August and a 6.6% decline compared to the same time last year. These numbers indicate that, at least on a surface level, the foreclosure crisis that once gripped the state is easing.

But statistics only tell part of the story.

Monique Ramirez, a single mother living in Tacoma, was one of the hundreds of Washington residents who received a notice of pre-foreclosure this past summer. She lost her job in late 2023, couldn’t keep up with rising mortgage rates, and found herself teetering on financial collapse. “I never thought I would be one of those people who fell behind,” she said. “But when everything keeps getting more expensive—food, gas, electricity—something has to give.”

Her story is becoming familiar across the state.

The Broader Trend: A Long Decline With New Challenges

To understand where we are now, it helps to look backward. In 2010, during the peak of the foreclosure crisis, more than 45,000 homes in Washington entered pre-foreclosure as homeowners bore the brunt of the Great Recession. The numbers remained staggering for years, with 33,000 homes in pre-foreclosure in 2011 and 2012, as Washington residents struggled with job loss and plummeting home values.

Then, slowly, the market began to heal. From 2013 onward, Washington saw a consistent decline in pre-foreclosures, dropping below 5,000 per year by 2018. Foreclosures became less frequent as homeowners saw their home values rise and lending regulations tightened to prevent another housing crisis.

By 2020, a different kind of crisis arrived: the COVID-19 pandemic. But ironically, it didn’t come with an immediate spike in foreclosures. Government-imposed foreclosure moratoriums and massive federal aid kept struggling homeowners afloat. Consequently, pre-foreclosures sank to a decade low of 1,497 in 2021.

Yet as protections expired, cracks in the system began to reappear. Since 2022, pre-foreclosures have begun inching back up, reaching over 2,200 cases by September 2024. This number is still well below the historic highs of the late 2000s. However, for families like Monique’s, that’s little consolation.

Affordability Is Straining the Middle Class

Previous foreclosure surges were often tied to economic downturns or lending crises. However, Washington’s new wave of pre-foreclosures isn’t just about lost jobs or risky loans. It’s about affordability.

The housing market in Washington remains expensive. Mortgage rates jumped past 7% earlier this year, and a shrinking supply of affordable homes has made it difficult for struggling buyers to refinance. Even as home values have increased, many homeowners who bought in the last five years stretched themselves thin to afford their homes, betting on rising incomes and stable job markets to support their payments.

Instead, they find themselves increasingly burdened by inflation. Price hikes on essentials like food, healthcare, and utilities have far outpaced income gains for many middle-class families. For homeowners who were already paying 40% or more of their income on their mortgage, small financial setbacks—like a temporary job loss or a medical bill—can snowball into missed mortgage payments.

For low-income homeowners, the risks are even greater. Many of these families had a harder time qualifying for loans on favorable terms, making them more susceptible to adjustable-rate mortgages that have seen payments balloon in recent years. Their jobs are more likely to be in industries affected by economic swings, leaving them vulnerable to financial instability.

What’s Next for Washington Homeowners?

If September’s data suggests anything, it’s that Washington hasn’t seen a foreclosure wave on the scale of 2010—and it likely won’t. Home equity levels remain relatively strong, giving struggling homeowners a better chance of selling rather than losing their homes outright. Banks are also generally more willing to work with borrowers, offering forbearance options that weren’t as common in previous downturns.

Still, the pressure remains. Recent pre-foreclosure figures may show a decline, but thousands of Washingtonians are still worried.

For Monique, the future remains uncertain. She’s picked up a second job and is working with a housing counselor to negotiate a repayment plan with her bank. “I just want stability,” she said. “I don’t need a miracle. I just need a chance to catch up.”

Many Washington homeowners are hoping for a chance to hold on, even as the numbers move in the right direction.