Distressed Sales Closing in on "Normal" Levels

While CoreLogic says February is typicallyrna month in which distressed sales post a seasonal decline, real-estate ownedrn(REO) and short sales this past February were the lowest for that month sincern2008.  Combined they accounted for 13.5rnpercent of total sales, down 0.8 of a point from January and a 3 percentagernpoint drop from February 2014.</p

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REO sales accounted for 9.7 percent ofrnall sales during the month and short sales for 3.8 percent.  Distressed sales are now at one-third the levelrnthere were in January 2009 when those sales peaked at 32.4 percent of allrnsales.   At that point REO accounted forrn27.9 percent of sales.  </p

The company says the share ofrndistressed sales before the housing crisis was traditionally about 2rnpercent.  While there will always beenrnsome level of distress in the housing market CoreLogic projects that, at therncurrent rate of year-over-year decline, distressed sales should return to that “normal”rn2 percent level in mid-2017.  The declinernin REO sales is one driver of rising prices as those properties usually sell atrna larger discount than short sales.</p

Distressed sales are still elevated inrnmany states.  Michigan had the largestrnshare in February at 22.6 percent closely followed by Florida at 22.2rnpercent.  Other states that were wellrnabove the national average were Illinois (20.4 percent), Maryland (19.1rnpercent) and Connecticut (19 percent). </p

The largest decline in the percentagernof distressed homes was in Nevada with an annual drop of 8.4 percentage point.  California had the largest improvement of anyrnstate from its peak distressed sales share, falling 57.3 percentage points fromrnits January 2009 peak of 67.5 percent. </p

Of the largest 25 Core BasedrnStatistical Areas (CBSAs) by number of mortgage loans, Miami-Miami Beach hadrnthe largest share of distressed sales at 24.4 percent, followed by Orlando (24.4rnpercent), Tampa-St. Petersburg-Clearwater (23.8 percent), Chicago (23.1rnpercent) and Las Vegas-Henderson-Paradise (19.1 percent).    At the peak in February 2009 distressed salesrnmade up 76.3 percent of sales in the Riverside-San Bernardino-Ontario CBSA.  That share had dropped to 13.2 percent inrnFebruary 2015.  The largest change overrnthe 12 months ended this February was in Atlanta where distressed sales fell byrn9.2 percentage points to 16.2 percent of sales.

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