Orlando Leads Nation in Distressed Home Sales

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Nationwide REO sales share down 21 percentage points from 2009 market high

Irvine-Ca based CoreLogic is reporting this week that U.S. distressed sales, which include REOs and short sales, accounted for 10.3 percent of total home sales nationally in the U.S. in December 2015, down 2.8 percentage points from December 2014 and down 1.5 percentage points from November 2015.

Distressed Sales Highlights for December 2015:

• Of total sales in December 2015, distressed sales made up 10.3 percent and real estate-owned (REO) sales made up 6.9 percent

• The REO sales share was 21 percentage points lower than it was at the peak recorded in January 2009 at 27.9 percent

• Only eight states had increases in their distressed sales shares in December 2015

Within the distressed category, REO sales accounted for 6.9 percent and short sales accounted for 3.4 percent of total home sales in December 2015. The REO sales share was 2.4 percentage points below the December 2014 share and is the lowest for the month of December since 2006. 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 December 2015 compared with a year earlier. Maryland had the largest share of distressed sales of any state at 20.2 percent1 in December 2015, followed by Connecticut (19.2 percent), Florida (18.5 percent), Michigan (18.2 percent) and Illinois (17.6 percent). North Dakota had the smallest distressed sales share at 2.7 percent. Nevada had a 5.1 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 59.5 percentage points from its January 2009 peak of 67.4 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, Orlando-Kissimmee-Sanford, Fla. had the largest share of distressed sales at 20.4 percent, followed by Baltimore-Columbia-Towson, Md. (20.3 percent), Tampa-St. Petersburg-Clearwater, Fla. (20.2 percent), Chicago-Naperville-Arlington Heights, Ill. (20.1 percent) and Las Vegas-Henderson-Paradise, Nev. (14.5 percent). Denver-Aurora-Lakewood, Colo. had the smallest distressed sales share among this group of the country's largest CBSAs at 2.9 percent. Las Vegas-Henderson-Paradise, Nev. had the largest year-over-year drop in its distressed sales share, falling by 5.3 percentage points from 19.8 percent in December 2014 to 14.5 percent in December 2015. 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 10.7 percent in December 2015.