What to Expect in the 2026 Foreclosure & Short Sale Market (Nationwide)

If you’ve been in real estate long enough, you can feel it in your bones before the headlines catch up: distress is creeping back into normal conversation.

Not “2008 normal” (thankfully). More like “a growing slice of the market that agents, investors, title, and homeowners need to be ready for again” normal.

Going into 2026, most indicators point to a slow but steady rise in distress sales across the U.S., mostly driven by affordability pressure, higher-for-longer rates, and pockets of borrower stress. Foreclosure activity has already been trending up in 2025, with ATTOM reporting year-over-year increases and higher foreclosure starts and completed foreclosures.

Distress won’t explode, but it should keep growing (and “normalize”)

Here’s the important distinction: we’re not talking about a tsunami. We’re talking about a tide that keeps coming in.

Delinquencies have been relatively stable nationally, but with subtle signs of stress increasing in late-stage missed payments and serious delinquencies. Meanwhile, foreclosure activity has been rising year-over-year in multiple monthly snapshots.

That combination usually means:

- More homeowners entering hardship situations

- More files getting “stuck” (loss mitigation dragging, missing docs, repeated requests)

- More agents dealing with short sale questions they haven’t had to answer in a while

And when distress becomes more common, it becomes more “transactional.” Less shock. More process. That’s what “normalizing” looks like.

Mortgage rates should ease… but not enough to magically fix affordability

A big reason distress grows is simple: monthly payments are still heavy.

Fannie Mae’s ESR forecast (as of Sep 2025) projected mortgage rates ending 2026 around 5.9%, with sales improving versus 2025. That’s meaningful progress, but it’s not the 3% world everyone is still emotionally attached to.

MBA commentary has also suggested rates could remain above 6% for stretches, even as inventory loosens.

So the practical 2026 reality is:

- Some sellers still can’t “just list it” if the home needs work or equity is tight

- Payment shock stays a thing for homeowners who’ve had life changes (job, divorce, health, taxes/insurance)

- Short sales stay relevant because the affordability squeeze isn’t gone

The distress map will be uneven (and that matters for agents)

Distress doesn’t rise evenly across the country. It clusters.

ATTOM’s state-level and monthly reporting has repeatedly shown higher foreclosure starts in big-population, high-volume states like Florida, Texas, and California (among others). That doesn’t mean those states are “bad.” It means volume and certain borrower profiles create more raw activity.

In 2026, I’d expect the “hot spots” to be driven by:

- High insurance/property tax areas (payment creep is real)

- Markets where investor-owned rentals are more common (tenant issues + vacancy + repairs can flip a landlord fast)

- Areas with slower job growth or industry-specific layoffs

- Older housing stock (deferred maintenance is a silent budget killer)

If you’re an agent, the takeaway is simple: even if your MLS looks fine overall, you may see more distress in specific neighborhoods, price points, and property conditions.

Short sale volume grows when lenders get faster (yes, really)

Here’s a counterintuitive truth: short sales increase when lenders start processing them more efficiently.

When loss mitigation teams are overwhelmed or slow, deals die. When they get staffed up and systems get streamlined, more short sales actually make it to the finish line.

That’s why having a clean, repeatable workflow matters. If you want a quick overview of what that workflow looks like in real life (without the chaos), This is exactly the kind of short sale processing support we provide every day at Crisp.

In 2026, the winners will be the people who treat short sales like a normal listing type

Agents who thrive in a rising-distress market don’t become “short sale gurus” overnight.

They do a few simple things consistently:

- They qualify the situation early (hardship, liens, occupancy, mortgage type, timelines)

- They price correctly based on lender reality (not hope)

- They run the file like a project: documents, portals, update cadence, and deadlines

- They keep the buyer’s side calm and moving so the deal doesn’t rot

This is why our model is built around helping real estate agents close short sales faster without the agent having to become a negotiator, portal jockey, and therapist all at once.

Homeowners will need clarity, not hype

When homeowners are in trouble, they get bombarded with two flavors of noise: doom (“you’re definitely losing the house”) or hype (“we can stop foreclosure instantly!”).

In 2026, the biggest value you can provide a homeowner is a calm, honest path:

- What options are real

- What timelines look like

- What documents are needed

- What “approval” actually means (and what it doesn’t)

Short sales are still one of the cleanest ways to avoid foreclosure when the math and timing work. And if someone wants to see what the starting line looks like, we keep it straightforward.

The 2026 bottom line

Distress is likely to keep rising and becoming a more normal part of the market in 2026, but it should look more like a gradual expansion than a crash. Foreclosure activity has already been trending upward year-over-year in 2025 data, and mortgage rates are expected to ease only modestly.

So if you’re an agent or investor, the best move is not to panic.

It’s to prepare:

- Know how to spot a short sale early

- Know what kills these deals (and how to prevent it)

- Have a repeatable process (or partner) ready before the file gets ugly

Because in 2026, short sales won’t be some rare, weird unicorn deal.

They’ll just be… Tuesday.