Realtor.com Flags 10 Short-Sale Hot Spots as U.S. Transactions Rise 16%

Q: Are these 'short sale hot spots' the first dominoes to fall in a wider housing market downturn?

Probably not as the start of a national housing slump, but they are credible early warning signs of stress in specific markets. The short-sale data are rising fast: up 4% from 2023 to 2024, 10% from 2024 to 2025, and another 16% in early 2026. That matters because short sales usually appear when owners who bought near the peak have little equity left and cannot cover selling costs. The hot spots share the same pattern: sharp post-2020 price run-ups, softer demand, more inventory, and higher carrying costs such as insurance, taxes, and HOA fees. Still, the national picture does not yet look like a broad downturn. Short sales were only 0.6% of conventional closings in 2025, and distressed sales were about 2% of existing-home sales by mid-2026. Foreclosures and delinquencies are rising in many metros, but they remain well below crisis-era levels. Most owners still have substantial equity, lending standards are much tighter than before the 2008 crash, and national home prices are still slightly higher than a year ago. What these markets do signal is a localized reset that could spread if rates stay high and costs keep rising. Utah, Florida, and parts of Colorado are worth watching because they combine recent price pullbacks with more underwater borrowers and rising homeowner expenses. In that sense, these are not yet falling dominoes nationwide, but they are the clearest pressure points in a housing market that is becoming more uneven.

1 articles · Updated · Deseret News · Jul 17

Realtor.com identified 10 midsized U.S. housing markets with the highest share of short-sale listings in May, led by Lakeland, Florida, at 6.7%, followed by Colorado Springs at 5.8% and Putnam, Connecticut, at 5.6%.
Short sales remain a small slice of the market—0.6% of conventional closings in 2025 and fewer than 30,000 total—but they have been climbing since 2023, including a 16% jump over the past four months.
The rise is tied to buyers who stretched to purchase during the 2020-2022 boom and are now squeezed by slower sales, higher inventory and flat or falling prices, leaving some owners owing more than their homes are worth.
Salt Lake City-Murray was not on the top-10 list, but its short-sale share reached 1.8% in 2025, up 12.2% from 2024; Utah also had the highest short-sale-to-foreclosure ratio at about 3.3 to 1.
Florida illustrates the broader pressure: roughly 1 in 7 U.S. listings are in the state, nearly 45% have taken price cuts, and Lakeland agents say many troubled owners bought at peak pandemic-era prices.