The percentage of residential home sales that were distressed sales (REO and short sales) fell below 10 percent in March 2016, and it is estimated that at its current rate of decline will be back to its “normal” pre-crisis level by the middle of 2018, according to data released by CoreLogic on Thursday.
The distressed sales share registered at 9.9 percent in March, which represented a decline of 2.7 percentage points over-the-year, according to CoreLogic. REO sales accounted for about 6.8 percent of all residential home sales in March, while short sales accounted for about 3.2 percent. The REO share was down by 2.4 percentage points over-the-year and is less than a third of what it was at its peak (27.9 percent in January 2009). The short sale share has remained below 4 percent since the middle of 2014.
The overall distressed sales share in March 2016 (9.9 percent) is less than a third of what it was at its peak in January 2009, when distressed sales accounted for nearly a third of all residential home sales (32.4 percent). At its current rate of decline, CoreLogic estimates the distressed sales share is about two years away from reaching its "normal" level.
“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,” said Molly Boesel, Senior Economist with CoreLogic. “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.”
All but eight states experienced year-over-year declines in distressed sales in March. The largest distressed sales share during the month were Maryland (19.8 percent), Connecticut (18.9 percent), Michigan (18.1 percent), Florida (17 percent), and Illinois (16.7 percent), while the smallest distressed sales share for March went to North Dakota (2.4 percent).
Among the 25 largest core-based statistical areas (CBSAs), the ones with the highest distressed sales share in March were Baltimore (19.8 percent), Chicago (19 percent), Tampa (18.6 percent), Orlando (18.2 percent), and Newark (14.8 percent). The CBSA with the smallest cash sales share in March was Denver (2.6 percent).