Is the Housing Market Flashing Yellow? What the Fed and Foreclosure Data Are Telling Us

It’s been a while since the Federal Reserve sounded even mildly nervous about housing — but lately, their tone has changed. At the same time, foreclosure reports are creeping up. That combination should have every duplex owner and small-property investor paying close attention.

For the last couple of years, the Fed’s focus has been on inflation and jobs. Now they seem to be turning their attention toward housing.

According to recently released minutes from the July Fed meeting, several members noted a slowdown in housing demand, more homes sitting on the market, and early signs of price pressure. In other words, they’re growing concerned.

While it may seem like an easy fix – just lower the fed rate to help lower interest rates and as a result, spur growth, in actually isn’t. That’s because inflation has proven stubbornly high. Few things are bigger accelerants to inflation than lower interest rates.

In other words, the Fed is walking a tightrope between fighting inflation and destroying the real estate market in the process.

Meanwhile, another recent headline was cause for additional concern

Foreclosures jumped 17% year-over-year in the third quarter of 2025, according to ATTOM Data Solutions. More than 101,000 properties had some kind of foreclosure filing in the third quarter. That represents an increase of less than 1% over the second quarter. However, it also 17% higher than the third quarter last year.

That doesn’t mean it’s time to panic, it’s just something to make note of. Most of these foreclosures are in the Sun Belt. Think Florida, the Carolinas, California and Nevada. These states are often harbingers of things to come; both good and bad.

Nationwide, 1 out of every 1,402 housing units had some sort of filing in third quarter.  Lakeland, FL, which lead the nation, saw 1 out of every 470 houses in the foreclosure process.

To put it in context, during the Great Recession, 1 out of every 54 households faced foreclosure.

Nonetheless, it’s the highest rate we’ve seen since before the pandemic. Rising property taxes, insurance premiums, and stubbornly high mortgage rates are squeezing property owners. This is especially true in warmer climates, where many retirees are on fixed incomes.

According to ATTOM’s “Foreclosure Rates by State — August” Minnesota had 1 foreclosure per 5,501 housing units in August. In January, however, that number was 1 in every 6,315 housing units. Counties with the most foreclosure filings were Sibley, Renville and Isanti.

Just like a traffic light, it’s a flashing yellow light. We don’t know when it stops flashing whether it will be red or green. It’s simply a reminder to pay attention.