The American housing market is facing a crisis of confidence as new data reveals a troubling convergence of economic fears and real-world foreclosure struggles. Legal requests related to foreclosures in 2025 have reached their highest level in five years, coinciding with widespread anxiety among homeowners about potential recession impacts on their housing stability. With foreclosures rising across the nation, experts are questioning whether foreclosure rates will continue to climb.
Calls to LegalShield provider attorneys about foreclosures spiked in May 2025 to the highest level since April 2020, marking a significant escalation in homeowner distress. This surge reflects mounting pressures on families who purchased homes during the pandemic-era buying surge and are now confronting a perfect storm of financial challenges. With foreclosures rising at an alarming rate, many are asking: will foreclosures increase in 2025?
"The hard data from consumers calling lawyers matches their fears about the economy: their homes are at risk and things may get worse."
— Warren Schlichting, LegalShield CEO
The timing of this surge is particularly concerning as it coincides with broader economic uncertainties. Homeowners who secured properties during the 2020-2022 buying frenzy are now facing reality as their financial circumstances change, creating a wave of legal consultations aimed at protecting their most valuable asset. As rising foreclosures continue to dominate headlines, increasing rates may signal a deeper housing crisis ahead.
The current foreclosure crisis isn't driven by a single factor but rather by a convergence of financial pressures hitting homeowners simultaneously. These challenges are particularly acute for those who purchased during recent years when home prices were elevated and lending terms were more aggressive. With data showing significant increases, experts warn that foreclosure rates in 2025 could continue climbing.
"Our data highlights a convergence of pressures: buyers from the homebuying surge a few years ago want help with rising insurance premiums, property tax reassessments, and adjustable-rate mortgage resets. People are reaching out to LegalShield provider lawyers to save their homes, and they're scared of the next shoe to drop in the economy."
— Matt Layton, Senior Vice President of Consumer Analytics, LegalShield
Beyond individual foreclosure concerns, LegalShield's comprehensive data reveals systemic changes in housing market activity. The legal plan provider, which provides access for approximately 150,000 calls monthly from consumers nationwide covering more than 90 areas of law, has documented significant declines across multiple housing-related categories. As foreclosures rising become a national concern, market participants are increasingly cautious.
Legal activity related to housing sales fell to its lowest level since July 2023—the last time the Federal Reserve raised interest rates. This correlation suggests that mortgage rate uncertainty continues to be a primary driver of market hesitation. Both buyers and sellers face mounting friction amid affordability challenges due to elevated home prices and persistent inventory challenges, while concerns about foreclosure rates continue to grow.
LegalShield's Housing Construction Index, which historically tracks closely with Housing Starts reported by the U.S. Census Bureau, has fallen to its lowest level since March 2020 and declined 4.1% this year. This dramatic decrease suggests that builders are pulling back on new construction projects, potentially setting the stage for future housing supply challenges. With foreclosures on the rise, construction companies are increasingly cautious about new developments.
"The other concerning finding is a drop in consumers asking for help to buy a home and a decline in questions from builders."
— Warren Schlichting, LegalShield CEO
One of the most striking findings from LegalShield's survey data is the significant impact of legal issues on housing market participation. These problems are not only affecting current homeowners but also creating substantial barriers for potential buyers. As foreclosures rising continues to impact market sentiment, many potential buyers are reconsidering their plans, asking, “Will foreclosures increase in 2025?” This could affect investment decisions.
Over a third of current homeowners (38%) experience costly legal issues related to their property. These problems range from title disputes and boundary issues to contractor problems and HOA conflicts. When homeowners lack proper legal guidance, these issues can evolve from minor inconveniences into major financial disasters, potentially contributing to sobering 2025 foreclosure statistics.
Perhaps most concerning for overall market health, 30% of survey respondents have walked away from buying a home due to preventable legal problems. In a market where inventory remains tight and competition can be fierce, losing potential buyers to avoidable legal issues represents a significant inefficiency and lost opportunity. With foreclosures rising, buyers are increasingly risk-averse.
The survey reveals that 44% of homeowners regret not consulting an attorney during their homebuying process. This widespread regret suggests that many current legal problems could have been prevented with proper legal guidance upfront, emphasizing the value of proactive legal protection. As foreclosures continue to make headlines, many homeowners are wondering if proper legal counsel could have prevented their current situations.
The current housing landscape demands a more strategic approach to homeownership protection. As economic pressures mount and market conditions shift, having proper legal guidance becomes essential for protecting one's most valuable asset. With concerns about foreclosures, proactive protection is more important than ever.
"Perhaps now more than ever, consumers need to consider how to protect themselves and their asset if they are able to buy a home in the midst of these economic headwinds. Instead of calling a lawyer after something goes wrong, smart homeowners are starting to get legal advice upfront—before they buy, before they renovate, before problems become expensive disasters."
— Warren Schlichting, LegalShield CEO
Legal requests related to foreclosures reached their highest level in five years, with calls spiking in May 2025 to the highest level since April 2020. This data suggests that foreclosure rates may continue to climb as economic pressures mount.
Based on current trends showing foreclosures rising and the highest legal request levels in five years, experts are concerned that foreclosures could continue to increase as homeowners face mounting financial pressures.
More than 70% of homeowners and prospective buyers worry that a potential recession and tariffs could disrupt their housing plans, contributing to concerns about whether rising foreclosure rates will continue.
44% of homeowners regret not using a lawyer during the homebuying process to protect their asset.
Over a third of current homeowners (38%) experience costly legal issues related to their property.
30% of survey respondents have walked away from buying a home due to preventable legal problems, demonstrating how foreclosures rising and legal concerns are impacting market participation.
LegalShield's Housing Construction Index is down 4.1% this year and at its lowest level since March 2020, partly due to concerns about increasing foreclosure rates and market instability.
The LegalShield survey was conducted in May 2025 and surveyed 802 adults, ages 25-75, who live in the United States. The sample was balanced by age, among other demographic variables, according to the U.S. Census. Legal request data is based on LegalShield's analysis of consumer calls and inquiries from their network of provider attorneys serving consumers nationwide.
This comprehensive data provides unique insight into the real-world impact of economic pressures on American families, offering a ground-level view of housing market stress that complements traditional economic indicators. As foreclosure data continues to emerge, this information becomes increasingly valuable for understanding market trends.
If you're facing housing legal challenges or want to protect your home investment as foreclosure rates continue to climb, LegalShield provides access to qualified attorneys who can help with foreclosure prevention, home purchase legal review, and property-related legal issues.
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Content Specialist at LegalShield, creating educational resources about legal and consumer protection topics. She focuses on making complex legal and financial concepts accessible to readers and has contributed to various educational articles on consumer rights and protections.
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