A couple of months ago I was driving down Springdale Road, out past the beer garden and the old nursery, and I counted three houses in one stretch with what I’d call “distress tells” — overgrown yards, a notice taped to a front door, a truck full of furniture that didn’t look like a voluntary move. I didn’t think much of it at the time. Neighborhoods cycle. But then the first-half 2026 numbers started circulating, and suddenly that stretch of road made a lot more sense.

Foreclosure filings are up something like 21% in the first half of this year compared to the same period in 2025. That’s not a blip.

And here’s the part that I think people are missing: this isn’t a subprime story the way 2008 was. The stress right now is concentrated in FHA and VA loans — which means we’re talking about people who did everything right. First-time buyers who used the programs designed for them. Veterans who used the benefit they earned. These aren’t people who took out liar loans or stretched into adjustable-rate mortgages on houses they couldn’t afford. Many of them bought at the peak of rates thinking they’d refinance in a year or two, and that refi window never opened the way anyone promised it would.

Why FHA and VA Loans Are Taking the Hit

Both loan types allow lower down payments — 3.5% for FHA, zero down for VA — which means less equity cushion from day one. When home values in some Texas markets softened even slightly through late 2024 and into 2025, some of those borrowers ended up underwater or barely treading water on equity. Add in job volatility, insurance premium increases (which in Texas have been brutal, especially for anything in a flood-adjacent zip code), and the simple math of household budgets squeezed by three years of elevated costs, and you’ve got a population with very little room to absorb a bad month.

The FHA mortgage insurance premium doesn’t disappear the way PMI can on a conventional loan once you hit 20% equity. It stays. That’s a line item that doesn’t flex.

I’d also point you to something I wrote earlier about why rates haven’t come down the way buyers were hoping — the relationship between the Fed’s decisions and actual mortgage rates is not what most people think it is, and a lot of people who were counting on a refinance out of their FHA loan are still waiting.

What This Means on the Ground in Texas Markets

Foreclosures don’t just affect the people losing their homes. They affect the blocks those homes sit on.

In Houston, I’ve heard from people watching certain zip codes in the southwest — Alief, Westwood, parts of Stafford — where foreclosure activity has picked up noticeably. Same story in some of the outer DFW suburbs, places like Forney and Kaufman County that saw huge FHA purchase volume during 2021 and 2022 when prices were running and buyers were reaching.

Here in Austin, the inventory picture is a little more complicated. We still don’t have a flood of distressed listings hitting the MLS at once — Texas foreclosure law is non-judicial but the process still takes time, so what’s filed today might not show up as a listing for months. But it’s coming into the pipeline.

A few things buyers in this environment should think about:

  • Foreclosure sales often come with deferred maintenance. A foundation crack, a failing HVAC, a roof that needed replacing two years ago — these get ignored when someone is in financial distress. Budget for an aggressive inspection and don’t let anyone pressure you out of one. Sellers can’t just deny your right to inspect once a contract is in place, but know your rights going in.
  • Title work matters more on distressed sales. Liens can be layered on a property in ways that aren’t obvious — tax liens, HOA liens, contractor liens. Don’t skip the title search to save money.
  • Comparable sales will shift. If distressed properties start closing at discounts in a neighborhood, that affects what the appraiser sees. If you’re buying conventional in the same area, your appraisal picture changes.
  • First-time buyers may actually find opportunity here. The most overlooked sources of homes for first-time buyers have always included distressed inventory — not as a predatory play, but as a chance to buy at a basis that a fully renovated retail listing doesn’t offer.

The People Behind the Statistic

I want to be honest about something that gets glossed over when people start talking about foreclosure “opportunities.”

The 21% increase is not an abstraction. It’s someone’s neighbor packing a moving truck they didn’t plan to pack. It’s a veteran who served and came home and did the responsible thing by buying a house, now facing something that feels like failure even though the system handed them a fragile starting position.

Texas has some of the highest property tax burdens in the country — somewhere around 1.6% to 2.1% effective rate depending on the county and local exemptions — and when you layer that on top of an FHA payment and insurance that’s gone up 30% in two years, the math turns hostile fast. That’s not a personal failing. That’s a structural problem.

What I’d Actually Do Right Now

If you’re a buyer looking at this as an opening, get your financing completely squared away before you go shopping. Distressed deals can move on odd timelines, and sellers — whether it’s a bank or a homeowner trying to avoid foreclosure with a short sale — are not going to wait for you to get your pre-approval sorted.

If you’re a homeowner who’s feeling the squeeze, talk to your servicer before you miss a payment. FHA and VA both have loss mitigation programs that work better if you call before default, not after. It’s an uncomfortable conversation but it’s a much easier one than the alternative.

And if you’re thinking about buying something to rent or flip in this environment, just go in clear-eyed. Distressed inventory is not automatically cheap enough to make the numbers work. Price it like a professional and walk away if it doesn’t pencil.

The signs were already on Springdale Road. Now the data caught up with them.