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Distressed Sales Accounted for Almost 13 Percent of Total Home Sales in December 2014

Lowest Distressed Sales Share for the Month of December Since 2007

Molly Boesel    |    Mortgage Performance

Distressed sales (REO and short sales) accounted for 12.8 percent of total home sales nationally in December 2014, a 2.8 percentage point drop from December 2013, and a 1.2 percentage point drop from November 2014. The December 2014 distressed sales share was the lowest for any December since 2007. Within the distressed category, REO sales made up 8.8 percent of total home sales in December, and short sales made up 4 percent. At its peak, the distressed sales share totaled 32.4 percent of all sales in January 2009, with REO sales making up 28 percent of that share. The ongoing shift away from REO sales is a driver of improving home prices, as REOs typically sell at a larger discount than do short sales. There will always be some amount of distress in the housing market, so one would never expect a 0 percent distressed sales share, and by comparison, the pre-crisis share of distressed sales was traditionally about 2 percent.

Michigan had the largest share of distressed sales of any state at 23.6 percent1 in December 2014, followed by Florida (22.4 percent), Illinois (20.8 percent), Maryland (18.7 percent) and Connecticut (18.6 percent). Nevada experienced a 9.6 percentage point drop in the distressed sales share from a year earlier, the largest of any state. California experienced the largest improvement from the peak distressed sales share of any state, falling 56.9 percent from its January 2009 peak of 67.4 percent.

Of the largest 25 Core Based Statistical Areas (CBSAs) based on population, Miami-Miami Beach-Kendall, Fla. had the largest share of distressed sales at 24.7 percent, followed by Orlando-Kissimmee-Sanford, Fla. (24.2 percent), Tampa-St. Petersburg-Clearwater, Fla. (24 percent), Chicago-Naperville-Arlington Heights, Ill.(23.6 percent) and Las Vegas-Henderson-Paradise, Nev. (19.8 percent). Riverside-San Bernardino-Ontario, Calif. had the largest year-over-year drop in its distressed share, falling by 10.8 percentage points from 24.6 percent in December 2013 to 13.8 percent in December 2014. This California CBSA also had the largest overall improvement in distressed sales share from its peak value. At its peak in February 2009, distressed sales made up 76.3 percent of all sales in Riverside compared to its December 2014 rate of 13.8 percent.

[1] The distressed sales share for states and CBSAs listed in this report was calculated using sales from the past 12 months.

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