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Distressed Sales Share Falls to Lowest Level in Eight Years

short-sale-threeDistressed sales (short sales and REO property transactions) accounted for just 12.7 percent of residential real estate transactions nationwide in 2014, the lowest share since 2007, according to Black Knight's February 2015 Mortgage Monitor released today.

The share of distressed sales for 2014 was down from 17 percent reported for 2013, according to Black Knight. The distressed sales share reached its peak in 2011 when they accounted for 33 percent of all residential real estate transactions.

Despite the decline in short sales, traditional market sales outpaced their 2013 levels and reached their highest level since 2007, according to Black Knight.

Short sales declined by 45 percent year-over-year in 2014, and REO sales dropped by 16 percent. The average short sale discount for 2014 was 23 percent, meaning properties sold in short sales for an average of 77 cents on the dollar as compared to traditional market sales. The short sale discount reached its peak of 25.3 percent in July 2013.

By comparison, the REO discount is on the rise, increasing up to 27 percent – its highest level since Q4 2012, according to Black Knight. The peak for REO discounts was 29 percent, reached in April 2009.

Florida was the state with the highest distressed sales share for 2014 at 24.7 percent, meaning nearly one-quarter of all residential real estate transactions in Florida last year were sales of distressed properties. Florida's share was close to double the national average of 12.7 percent. The next closest state to Florida in percentage of transactions coming from distressed sales in 2014 was Illinois, at 20.3 percent.

Also, for the second straight year in 2014, Florida accounted for the largest share of the nation's distressed sales at 26 percent - an increase from 20.3 percent in 2013. California led the nation in that category for four years in a row from 2009 to 2012 before being overtaken by Florida in 2013, California accounted for 11.1 of the nation's distressed sales in 2014, less than half of Florida's percentage. Still, the four states with the highest percentage of of the nation's distressed sales (Florida, California, Illinois, and Michigan) combined accounted for more than 50 percent of such transactions nationwide.

Florida had the highest serious delinquency rate (90 days or more overdue, or in foreclosure) among so-called "bubble states" in 2014 with 6.5 percent, well above the national average of 3.8 percent. Florida's percentage of serious delinquent residential mortgage loans ranked fourth in the nation overall behind only New Jersey (8.4 percent), New York (6.8 percent), and Mississippi (6.7 percent). Mississippi is the only state out of the top four in serious delinquency rate that is a non-judicial foreclosure state, meaning the foreclosure process does not have to pass through the courts to be completed.

 

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.
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