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Distressed Sales Accounted for 12 Percent of Homes Sold Nationally in November 2015

Denver Had the Lowest Distressed Sales Share

Molly Boesel    |    Mortgage Performance

  • Of total sales in November 2015, distressed sales made up 11.9 percent and real estate-owned (REO) sales made up 8.7 percent  
  • Maryland remains the state with the largest share of distressed sales among all states at 20.3 percent
  • Denver-Aurora-Lakewood, Colo. had the lowest distressed sales share among the largest Core Based Statistical Areas (CBSAs) at 3.1 percent

Distressed sales, which include REOs and short sales, accounted for 11.9 percent of total home sales nationally in November 2015, down 1.9 percentage points from November 2014 and up 1.4 percentage points from October 2015. This month-over-month increase was expected due to seasonality, and the magnitude of the change was in line with previous Novembers.

Within the distressed category, REO sales accounted for 8.7 percent and short sales accounted for 3.2 percent of total home sales in November 2015. The REO sales share was 1.5 percentage points below the November 2014 share and is the lowest for the month of November 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-2019.

All but nine states recorded lower distressed sales shares in November 2015 compared with a year earlier. Maryland had the largest share of distressed sales of any state at 20.2 percent[1] in November 2015, followed by Connecticut (19.1 percent), Florida (19 percent), Michigan (18.9 percent) and Illinois (17.8 percent). North Dakota had the smallest distressed sales share at 2.7 percent. Nevada had a 5.4 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 59.2 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 (within one percentage point).

Of the 25 largest CBSAs based on mortgage loan count, Orlando-Kissimmee-Sanford, Fla. had the largest share of distressed sales at 21.2 percent, followed by Tampa-St. Petersburg-Clearwater, Fla. (20.7 percent), Baltimore-Columbia-Towson, Md. (20.4 percent), Chicago-Naperville-Arlington Heights, Ill. (20.4 percent) and Miami-Miami Beach-Kendall, Fla. (20.3 percent). Denver-Aurora-Lakewood, Colo. had the smallest distressed sales share among the largest CBSAs at 3.1 percent. Las Vegas-Henderson-Paradise, Nev. had the largest year-over-year drop in its distressed sales share, falling by 5.5 percentage points from 20.3 percent in November 2014 to 14.8 percent in November 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 10.9 percent in November 2015.



1 The distressed sales share for states and CBSAs was calculated using sales from the past 12 months.

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