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Clearing Foreclosure Backlog Shrinks Distressed Sales


Foreclosure Four BHDistressed sales represented 6 percent of all existing-home sales in June 2016, according to the Existing-Home Sales Report from the National Association of Realtors (NAR [1]). This percentage remained unchanged from May 2016 and down by 2 percentage points from 8 percent from June 2015 as lenders worth through their backlog of foreclosures.

The report showed that four percent of June's distressed sales were foreclosures making that percentage the lowest since NAR began tracking the data in October 2008; the remaining 2 percent were from short sales. Additionally, foreclosures sold for an average reduced price falling 11 percent below market value in June. This was a one percent change from the 12 percent reflected in May. Short sales increased to a discounted rate of 18 percent compared to the 11 percent discounted rate in May.

“Home-price appreciation has lifted many homeowners back into positive home-equity, and job and income growth has given more households the financial resources to remain current on their home loans,” says Frank Nothaft, Chief Economist for CoreLogic. “As lenders have worked through troubled loans, either through foreclosure proceedings or through loan modifications, the foreclosure inventory has continued to fall. CoreLogic has reported that the foreclosure rate nationwide fell by 25 percent in the year ending May 2016. As foreclosures decline further and the economy improves, the distressed sales share will likely decline further in the coming year.”

The total housing inventory for end of June to 2.12 million existing homes available for sale a decrease of 0.9 percent, and is now 5.8 percent lower than a year ago which stood at 2.25 million in June of 2015. The unsold inventory sits at a 4.6-month supply with the current sales pace. This is down from 4.7 months in May 2016.
Total existing-home sales, or completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 1.1 percent to a seasonally adjusted annual rate of 5.57 million in June from a downwardly revised 5.51 million in May. Sales are now up 3.0 percent from June 2015 which held 5.41 million, and they remain at their highest annual pace since February 2007 at 5.79 million.

Lawrence Yun, NAR chief economist, says this four-month streak of sales gains through June caps off a solid first half of 2016 for the housing market. "Existing sales rose again last month as more traditional buyers and fewer investors were able to close on a home despite many competitive areas with unrelenting supply and demand imbalances," he said. "Sustained job growth as well as this year's descent in mortgage rates is undoubtedly driving the appetite for home purchases."