Smallest Share of Distressed Sales since 2007

by devteam August 6th, 2015 | Share

Sales of lender-owned real estate (REO) in May representedrnthe smallest share of home sales in nine years. rnCoreLogic said that the overall share of distressed properties soldrnduring the month, including short sales as well as REO, fell to 9.9 percent. Thisrnwas 1.7 percentage points lower than the April share and 2.8 percentage points lowerrnthan a year earlier. CoreLogic said distressed sales typically decline as arnshare of sales in May but this May had the lowest since 2007 when it was 5rnpercent and was the lowest for any month since October 2007’s 6 percent.</p

Short sales have remained fairly stable at less than a 4rnpercent share – in was 3.5 percent in May – since mid-2014 but REO has fallenrnsteadily – in May it accounted for a 6.4 percent share.  </p

At the peak of market distress in January 2009, distressed sales totaledrn32.4 percent of all sales. There will always be some level of distress in thernhousing market, and by comparison, the pre-crisis share of distressed sales wasrntraditionally about 2 percent. If the current year-over-year decrease in therndistressed sales share continues, it would reach that “normal”rn2-percent mark in mid-2018.</p


CoreLogic noted that the declining share of REO sales is one of the driversrnof rising home prices.  Distressed salesrnare almost always sold at a discount from market prices but REO propertiesrntypically realize a greater discount than short sales.</p

Michigan had the largest share of distressed sales of any state at 21.4rnpercent in May 2015, followed by Florida (21.3 percent), Maryland (20.3rnpercent), Illinois (19.4 percent) and Connecticut (19.3 percent). </p

The greatest improvement in distressed sales was in Nevada with a 7.0rnpercentage point decline in the share from a year earlier.  California has dropped the furthest of anyrnstate from its crisis peak of 67.5 percent to a current share of 9.4rnpercent.  Only North Dakota and thernDistrict of Columbia however are even close to their pre-crisis numbers (withinrnone percentage point). </p

Numbers one through three of the 25 largest Core Based Statistical Areas (CBSAs)rnwith the greatest share of distressed sales were in Florida; Orlando at 24.6rnpercent, followed by Miami. (23.3 percent), and Tampa-St. Petersburg (22.9rnpercent).  Chicago (22.2 percent) andrnBaltimore (20.1 percent) rounded out the top five. The most improved CBSA wasrnAtlanta where the distressed sales share dropped 7.6 percentage points to 14.8rnpercent in the 12 months ending in May.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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