When foreclosure activities reach the REO stage, represents the outcome of financial distress. The homeowner is no longer in the picture, the auction process has been completed and the lender now fully owns the property. For real estate investors, this phase often marks the most visible – and actionable – point in the foreclosure cycle.
According to ATTOM Data SolutionsDecember 2025 delivered one of the most dramatic shifts in bank inventories all year. National REO counts increased by more than 53% month over month and almost doubled year after year, confirming that the increased foreclosure activity seen in 2025 is now fully manifesting itself in lender-owned supply.
This acceleration is important. REOs do not arise on their own; they are the result of months of prior distress working its way through the system. And as more properties land on banks’ balance sheets, investors may see greater inventory, greater pricing flexibility and bigger opportunities in certain markets.
December figures show that the foreclosure cycle is entering a new phase as we enter 2026.
National REO inventory is rising sharply
According to ATTOM Data Solutions, 5,953 REO properties were registered nationwide as of December 2025, which amounts to:
- +53.27% month-on-month
- +92.72% year over year
This is one of the biggest monthly increases in REO stock in recent years. The annual growth rate – which almost doubled compared to December 2024 – confirms that the number of bankruptcies is accelerating, not slowing down.
While foreclosure onsets and sales announcements provide early and mid-cycle signals, REOs reflect real results. These are properties that have not been resolved by loan modification, remediation or auction. Instead, they now sit entirely in lenders’ portfolios – often awaiting a decision.
State-level REO trends: Where inventory is growing fastest
Florida
Florida recorded one of the largest REO increases in the country. Although the number of early stage cases has fluctuated in recent months, December confirms that a growing number of cases are now being finalised.
- 427 PRISONERS
- +37.30% MoM
- +202.84% year-on-year
California
California reversed earlier weakness with a sharp monthly increase. Although the state’s bankruptcy process tends to move more slowly, December suggests that stalled cases have finally been resolved.
- 449 PRISONERS
- +42.99% MoM
- +35.65% annualized
Ohio
Ohio’s REO inventory continues to rise, following a steady conversion of auction activity earlier this year.
- 179 PRISONERS
- +37.69% MoM
- +62.73% year-on-year
North Carolina
North Carolina remains one of the fastest-moving exclusionary states. REO volume has more than doubled year over year, underscoring how quickly distress is moving through the pipeline.
- 152 PRISONERS
- +24.59% MoM
- +102.67% year-on-year
Texas
Although REOs in Texas remained stable month over month, the year-over-year increase remains notable. The state continues to convert distress into completed foreclosures faster than most judicial markets.
- 546 PRISONERS
- 0.00% MoM
- +135.34% year-on-year
Why the REO phase is so important for investors
REOs differ significantly from earlier phases of foreclosure and often appeal to a broader group of investors.
1. Banks become motivated sellers
Once a property becomes REO, it is no longer a loan; it is an asset that entails maintenance costs, tax risks and reputational risks. Many lenders prioritize liquidation, creating negotiating opportunities.
2. Due diligence is more accessible
Unlike auction purchases, REOs typically offer investors the opportunity to:
- Conduct inspections.
- Check the title before closing.
- Obtain appraisals.
- Take advantage of financing, including non-recourse loans.
This makes REOs particularly attractive to investors seeking a more traditional acquisition process.
3. REOs reflect real market stress
Rising REO counts indicate:
- Less successful loan training.
- Auctions failed clear inventory.
- Lenders accumulate properties.
When REOs rise, it is often a signal that broader housing pressures are becoming harder to absorb.
4. Retirement account investors get flexibility
For investors using a Self-Directed IRA or Solo 401(k), REOs offer:
- More time for due diligence.
- Clearer transaction structures.
- Opportunities for long-term buy-and-hold strategies.
Compared to auctions, REOs more easily align with the rules and timelines of retirement accounts.
REO insights at the provincial level: where conversions accelerated
Looking below state totals, county-level data shows where foreclosure pipelines are changing most rapidly.
Florida: Broad REO growth
Florida’s REO increase was geographically diverse:
- Lee County posted one of the strongest month-over-month increases, driven by the ongoing Gulf Coast tension.
- Orange County (Orlando) also saw meaningful growth, coupled with previous investor sign-ups.
- Miami-Dade and Broward Counties remained high, contributing to the statewide totals.
Takeaway for investors
Florida’s REO growth is not isolated to one metropolis: the stock expands across several regions.
California: Domestic markets are driving the recovery
The December increase in California was led by:
- Province of Rivierenlandwhere delayed things finally reached completion.
- San Bernardino District, continue its role as a pressure point in the field of foreclosure.
- Los Angeles Countywhich posted moderate but consistent growth.
Takeaway for investors
The Inland Empire remains the most reliable source of REO inventory in California.
Ohio: Central Ohio leads
Ohio’s REO growth was concentrated in:
- Franklin County (Columbus)which showed one of the strongest MoM increases.
- Cuyahoga County (Cleveland)which contributes to a stable volume.
- Montgomery County (Dayton)adding to the statewide momentum.
Takeaway for investors
Central Ohio continues to provide insight into future REO offerings.
North Carolina: The rapid conversion continues
The year-over-year increase in North Carolina was driven by:
- Mecklenburg County (Charlotte)
- Wake County (Raleigh)
Takeaway for investors
Despite a slower pace earlier this fall, December confirmed that many cases have now been completed.
Texas: High speed, high volume
Texas’ REO inventory remains high:
- Harris County (Houston) led the state.
- Dallas and Tarrant Counties contributed significantly.
- Bexar County (San Antonio) continued its upward trend.
Takeaway for investors
Texas remains one of the most efficient foreclosure pipelines in the country; the needs are changing quickly.
How Investors Can Use REO Data Strategically
REO data can help investors:
- Identify markets where banks’ inventory is expanding.
- Anticipate price flexibility from motivated sellers.
- Plan long-term rental or renovation strategies.
- Align acquisitions with tax-advantaged retirement accounts.
Tracking REOs in addition to foreclosure initiations and sale announcements provides a complete cycle view of market stresses and opportunities.
Disclaimer
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