Distressed Sales Expected to Return to Pre-Crisis Share in 2018
According to Irvine, Ca-based CoreLogic, U.S. distressed home sales, which include REO and short sales, accounted for 9.9 percent of total home sales nationally in March 2016, down 2.7 percentage points from March 2015 and down 1.7 percentage points from February 2016.
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Of total sales in March 2016, distressed sales accounted for 9.9 percent and real estate-owned (REO) sales accounted for 6.8 percent
The REO sales share was 21.1 percentage points below its peak of 27.9 percent in January 2009
Distressed sales shares fell in most states, including the oil markets
Within the distressed category, REO sales accounted for 6.8 percent and short sales accounted for 3.2 percent of total home sales in March 2016. The REO sales share was 2.4 percentage points below the March 2015 share and is the lowest for the month of March since 2007. The short sales share fell below 4 percent in mid-2014 and has remained in the 3-4 percent range since then. At its peak in January 2009, distressed sales totaled 32.4 percent of all sales, with REO sales representing 27.9 percent of that share. While distressed sales play an important role in clearing the housing market of foreclosed properties, they sell at a discount to non-distressed sales, and when the share of distressed sales is high, it can pull down the prices of non-distressed sales. There will always be some level of distress in the housing market, and by comparison, the pre-crisis share of distressed sales was traditionally about 2 percent. If the current year-over-year decrease in the distressed sales share continues, it will reach that "normal" 2-percent mark in mid-2018.
All but eight states recorded lower distressed sales shares in March 2016 compared with a year earlier. Maryland had the largest share of distressed sales of any state at 19.8 percent in March 2016, followed by Connecticut (18.9 percent), Michigan (18.1 percent), Florida (17 percent) and Illinois (16.7 percent). North Dakota had the smallest distressed sales share at 2.4 percent. Oil states continued to see year-over-year declines in their distressed sales shares in March 2016. Texas saw a 1.3 percentage point decrease, Oklahoma saw a 0.3 percentage point decrease and North Dakota saw a 0.2 percentage point decrease. Florida had a 5 percentage point drop in its distressed sales share from a year earlier, the largest decline of any state. California had the largest improvement of any state from its peak distressed sales share, falling 59.9 percentage points from its January 2009 peak of 67.5 percent. While some states stand out as having high distressed sales shares, only North Dakota and the District of Columbia are close to their pre-crisis levels (each within one percentage point).
Of the 25 largest Core Based Statistical Areas (CBSAs) based on mortgage loan count, Baltimore-Columbia-Towson, Md. had the largest share of distressed sales at 19.8 percent, followed by Chicago-Naperville-Arlington Heights, Ill. (19 percent), Tampa-St. Petersburg-Clearwater, Fla. (18.6 percent), Orlando-Kissimmee-Sanford, Fla. (18.2 percent) and Newark, N.J. (14.8 percent). Denver-Aurora-Lakewood, Colo. had the smallest distressed sales share at 2.6 percent among this same group of the country's largest CBSAs. Only two of the largest 25 CBSAs had year-over-year increases in their distressed sales share: Cambridge-Newton-Framingham, Mass. was up by 0.9 percentage points and Nassau County-Suffolk County, N.Y. was up by 0.7 percentage. Orlando-Kissimmee-Sanford, Fla. had the largest year-over-year drop in its distressed sales share, declining by 6.3 percentage points from 24.5 percent in March 2015 to 18.2 percent in March 2016. Riverside-San Bernardino-Ontario, Calif. had the largest overall improvement in its distressed sales share from its peak value, dropping from 76.3 percent in February 2009 to 10.1 percent in March 2016.