Sales of distressed homes (REO and short sales) fell to their lowest level in seven years and foreclosure inventory dropped by 34 percent year-over-year in December 2014, according to CoreLogic's February 2015 The MarketPulse report released on Tuesday.
Distressed home sales (REO and short sales) made up 12.8 percent of total home sales in December 2014, the lowest percentage reported for any one month since December 2007 at the beginning of the financial crisis. December's percentage was a 2.8 percent decline from the same month a year earlier and a decline of 1.2 percent from a month earlier, according to CoreLogic. REO sales accounted for 8.8 percent of December's distressed home sales share while short sales accounted for 4 percent.
"The ongoing shift away from REO sales is a driver of improving home prices, as REOs typically sell at a larger discount than do short sales, " CoreLogic senior economist Molly Boesel said. "There will always be some amount of distress in the housing market, so one would never expect a 0 percent distressed sales share, and by comparison, the pre-crisis share of distressed sales was traditionally 2 percent."
Distressed home sales hit their peak in January 2009 when they accounted for 32.4 percent of all home sales (REO sales made up 28 percent of that share).
The five states with the largest distressed home sales shares were Michigan (23.6 percent), Florida (22.4 percent), Illinois (20.8 percent), Maryland (18.7 percent), and Connecticut (18.6 percent). The state that experienced the largest year-over-year decline in distressed home sales share in December was Nevada, which saw a decline of 9.6 percent. The state that experienced the largest decline in distressed home sales share in December from its peak was California, which reported a decline of 56.9 percent from its peak total reached in January 2009 of 67.4 percent.
Out of the nation's 25 largest Core Based Statistical Areas (CBSAs), the top three in distressed home sales share were all located in Florida: Miami-Miami Beach-Kendall was tops with 24.7 percent, followed by Orlando-Kissimmee-Sanford with 24.2 percent and Tampa-St. Petersburg-Clearwater at 24 percent. Rounding out the top five were Chicago-Naperville-Arlington Heights, Illinois (23.6 percent) and Las Vegas-Henderson-Paradise, Nevada (19.8 percent).
Meanwhile, CoreLogic reported that about 552,000 residential homes, or about 1.4 percent of all homes with a mortgage nationwide, were in some state of foreclosure in December 2014 – a 34 percent decline from December 2013, when 840,000 homes (2.1 percent of all homes with a mortgage) were in foreclosure.
December marked 38 consecutive months of year-over-year declines in foreclosure inventory and 23 straight months with year-over-year declines of 20 percent or more, according to CoreLogic. Also experiencing large year-over-year declines were the 12-month sum of foreclosures, which totaled approximately 563,000 for the entire year of 2014 – a decline of 14.9 percent from the sum of completed foreclosures for 2013. The number of seriously delinquent mortgage loans (those 90 days or more overdue or in foreclosure) fell to 1.6 million in December 2014, a decline of 21.6 percent from the same month a year earlier.