Distressed Sales Plateau

Distressed residential sales inched up a bit month-over-month in January but have been relatively stable over the last year.  CoreLogic said on Thursday that sales of lender-owned real estate (REO) and short sales made up 11.2 percent of total home sales during the month, an increase of 0.6 percentage points compared to December. 

Distressed sales decreased by 3.3 percent from January 2015 but much of that decline appears from the chart below to have occurred in the early months of 2015.  Distressed sales have, except for a small spike in November, been hovering in the 9.5 to 11.5 percent range since last spring.

Of total sales in January REO accounted for 7.8 percent and short sales for 3.4 percent.  The REO sales share was 2.9 percentage points below the January 2015 share and is the lowest for any January 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 the total.

CoreLogic said 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.  It should be noted however that in April 2015 CoreLogic predicted the return to "normal" would occur in mid-2017.

All but eight states recorded lower distressed sales shares in January 2016 compared with a year earlier. Maryland had the largest share of any state at 19.9 percent followed by Connecticut (19.1 percent), Florida (18 percent), Michigan (18 percent) and Illinois (17.4 percent).  The largest annual decline, 5.1 percentage points, was in Nevada and the greatest change from peak levels has been in California where distressed sales have fallen 59.6 points from a peak of 67.4 percent in January 2009.

Only two of the largest 25 Core Based Statistical Areas (CBSAs) posted annual increases in its distressed sales share; Baltimore which rose 1.1 percentage points and the Nassau-Suffolk Counties in New York, up 0.7 points.  The greatest improvement was in Las Vegas, a drop of 5.4 percentage points from the previous January.

Baltimore also had the largest share of distressed sales at 20 percent followed by Chicago and Orlando-Kissimmee, each at 19.8 percent, Tampa-St. Petersburg-Clearwater (19.7 percent) and Las Vegas (14.2 percent).