The U.S Mortgage Bubble has popped (WSJ reports 26% spike in repos)

Foreclosure filings in the US housing market reached a six-year high in Q1 2026, increasing 26% year-over-year with 119,000 filings.

The US government initially banned foreclosures during and after the pandemic, and various programs allowed defaulted homeowners to avoid foreclosure until late 2025.

Home prices are already dropping in over half of the US.

A D.R. Horton house sold in 2022 for $394,000 was foreclosed on and is now listed for $270,000, representing a $125,000 loss.

Graham Stephan believes foreclosures are a healthy part of a well-functioning US housing market.

Graham Stephan believes the period during the pandemic when foreclosures were banned was a disservice to people saving money to buy a house.

The previous owners of the Spring Hill, Tennessee, house had a $720,000 mortgage at a 6.45% interest rate, resulting in an approximate monthly payment of $5,400.

A short sale indicates that the owner has defaulted on payments and is attempting to sell the house before foreclosure, requiring lender approval.

Foreclosure figures do not include short sales.

Spring Hill, Tennessee, is located in Williamson County, which is one of the most affluent counties in the US.

Home sales in Spring Hill, Tennessee, are at 10-year lows, while prices remain near record highs.

The median income in the Spring Hill, Tennessee, zip code is $115,000.

Graham Stephan states that a home's list price is merely a negotiating point, and buyers can negotiate significantly below it in markets with dropping values, high inventory, and long market times.

Graham Stephan believes the housing market is not yet ready for a flood of buyers, but specific areas like Tennessee, Georgia, Nevada, Arizona, Colorado, Washington, and Texas offer opportunities for buyers to target motivated sellers and make offers below list price.

Graham Stephan predicts that the natural churn in the market, including sales, moves, divorces, and refinances, will result in more existing mortgage holders having rates above 6%, leading to increased distress, short sales, and foreclosures.