Distressed Home Sales Continue to Decline

A distressed sale may be a transaction involving a real estate-owned (REO) property or a short sale. In February REO sales accounted for 9.7% of all home sales in February and short sales accounted for 3.8% of all sales in the month. At the peak of distressed sales in January 2009, 32.4% of all sales were distressed, including REO sales totaling 27.9% of all sales.

The CoreLogic researchers noted:

The ongoing shift away from REO sales is a driver of improving home prices, as bank-owned properties typically sell at a larger discount than short sales. There will always be some amount 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 is maintained, the distressed sales share would reach that “normal” 2-percent mark in mid-2017.

The 5 states with the largest percentage of distressed sales were Michigan (22.6%), followed by Florida (22.2%), Illinois (20.4%), Maryland (19.1%), and Connecticut (19%).  North Dakota, the District of Columbia, and Hawaii are the only states within one point of their respective pre-crisis distressed sales shares.

Among the 25 largest metropolitan areas these 5 posted the largest percentage of distressed sales:

• Miami-Miami Beach-Kendall, Florida (24.4%)
• Orlando-Kissimmee-Sanford, Florida (24.4%)
• Tampa-St. Petersburg-Clearwater (23.8%)
• Chicago-Naperville-Arlington Heights, Illinois (23.1%)
• Las Vegas-Henderson-Paradise (19.1%).

Atlanta-Sandy Springs-Roswell, Georgia, had the largest year-over-year drop in its distressed share, falling by 9.2 points from 25.4% in February 2014 to 16.2% in February 2015.

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