Distressed Sales Constitute Big Share of Home Resale Market

Distressed home sales are once again approaching a one thirdrnshare of the real estate market for existing homes, depressing home pricerntrends and indicating that the housing market is not yet out of the woods.

Accordingrnto a report issued by First American CoreLogic on Thursday, the sale of homesrnthat could be considered distressed accounted for 29 percent of all home resalesrnin January.  This was the second highestrnshare recorded for these sales, exceeded only by the peak of 32 percent reachedrnlast April.  To provide further context,rnprior to the fourth quarter of 2007, distressed sales constituted less than 5rnpercent of the resale market.

CoreLogic defines a distressed sale as a non-arms length transactionrnsuch as the sale of bank-owned real estate (REO) or short sales in which thernmortgagee agrees to release its loan for less than the full principal balancernof the mortgage.  Both REO and short salesrnhave increased in recent months after slowing for a time following the April 2009rnpeak.  

Sales of bank-owned property increased to 22 percent of homernsales in January compared to 19 percent in December.  One year earlier, REO sales represented a 27rnpercent market share.  Short sales accountedrnfor 8 percent of all sales in January compared to 7 percent in December.  In 2009 there were a total of 740,000 salesrnof REO and 234,000 short sales.

Distressed home sale prices have been running at around arnone-third discount from market sales prices for the last year.  In January the average price for a house soldrnon the open market was $247,700, but the average REO property sold for $141,900rnand the average short sale brought $215,300. rnThe average price for all distressed properties was $161,600.

Riverside, California had the largest percentage ofrndistressed sales among the 25 largest markets at 62 percent of all sales followedrnby Las Vegas and Sacramento at 59 percent and 58 percent respectively.  The largest share of bank-owned housing salesrnoccurred in Detroit (48 percent) and Riverside (47 percent).  The highest percentage of short sales wasrnrecorded in San Diego (19 percent) followed by Sacramento (18 percent) andrnOakland (16 percent).  While Florida isrnhome to all 10 markets having the most foreclosures, only Orlando and CapernCoral were among the top cities for distressed sales.  CoreLogic speculates that the judicialrnforeclosure process required in that state makes foreclosures take longer thanrnin other distressed states like California and Nevada.

CoreLogic distilled data for the report from its data basernof public records of property transactions for 2,200 counties in the U.S.   The data covers an estimated 85 percent ofrnall sales transactions nationwide.  REOrnsales are measured by recorded deed transfers while short sales were identifiedrnby comparing the sales price to the senior and any junior mortgage lien amountsrn(including cash out refinances) to determine the total mortgage debt.

CoreLogic is a provider of property profiles, digital streetrnmaps, plat maps, automated valuation models, and research services and otherrnreal estate related products.  

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