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Distressed Sales Accounted for 11 Percent of Homes Sold Nationally in April 2015

Only Two States are Near ‘Normal’ Distressed Sales Share

Molly Boesel    |    Mortgage Performance

Distressed sales—real estate-owned (REO) and short sales—accounted for 11.1 percent of total home sales nationally in April 2015, down 3 percentage points from April 2014 and a 1.5 percentage point decrease from March 2015. Distressed sales shares typically decrease month over month in April due to seasonal factors, and this distressed sales share was the lowest for the month of April since 2007.

Within the distressed category, REO sales accounted for 7.4 percent and short sales made up 3.7 percent of total home sales in April. The short sales percentage fell below 4 percent in mid-2014 and has remained stable 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. The ongoing shift away from REO sales is a driver of improving home prices since bank-owned properties typically sell at a larger discount than short 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 distressed sales share continues, the distressed sales share would reach that “normal” 2-percent mark in mid-2017.

Michigan had the largest share of distressed sales of any state at 21.7 percent1 in April 2015, followed by Florida (21.7 percent), Maryland (19.9 percent), Illinois (19.8 percent) and Connecticut (19.3 percent). Nevada had a 7.7 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 57.8 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 even close to their pre-crisis numbers (within one percentage point).

Of the 25 largest Core Based Statistical Areas (CBSAs) based on loan count, Orlando-Kissimmee-Sanford, Fla. had the largest share of distressed sales at 24.7 percent, followed by Miami-Miami Beach-Kendall, Fla. (23.8 percent), Tampa-St. Petersburg-Clearwater, Fla. (23.2 percent), Chicago-Naperville-Arlington Heights, Ill. (22.5 percent) and Baltimore-Columbia-Towson, Md. (19.8 percent). Atlanta-Sandy Springs-Roswell, Ga. had the largest year-over-year drop in its distressed sales share, falling by 8.3 percentage points from 23.5 percent in April 2014 to 15.2 percent in April 2015. The CBSA with the largest overall improvement in its distressed sales share from its peak value was Riverside-San Bernardino-Ontario, Calif., dropping from 76.3 percent in February 2009 to 12.7 percent in April 2015.

[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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