Distressed home sales, which are sales of REO properties and short sales, comprised 9.9 percent of all U.S. home sales in May, the first time since the recession that the distressed sales share has dipped below 10 percent, according to data released by CoreLogic on Thursday.
The national distressed sales share declined by 2.8 percentage points in May 2015 from May 2014's share of 12.7 percent. May 2015's share was the lowest total for any May since 2007, when it was reported at 5 percent. The distressed sales share declined by 1.7 percentage points from April 2015 to May, likely caused by seasonal factors, according to CoreLogic.
Of that 9.9 percent distressed sales share reported for May 2015, REO sales accounted for 6.4 percent of all home sales, the lowest share for REO since October 2007, when it was reported at 6 percent. The remaining 3.5 percent of distressed sales in May 2015 were short sales, which have remained stable since falling back down below 4 percent in mid-2014.
With the latest decline, the distressed sales share has fallen about 70 percent from their peak experienced in January 2009, when distressed sales made up 32.4 percent of all residential home sales. During that peak month, REO sales accounted for 27.9 percent of all home sales, according to CoreLogic. Distresses sales typically hovered around 2 percent before the crisis; if the year-over-year decline in distressed sales share continues at its current rate, it would reach that "normal" level of 2 percent by mid-2018, CoreLogic reported.
The five states with the largest share of distressed sales in May were Michigan (21.4 percent), Florida (21.3 percent), Maryland (20.3 percent), Illinois (19.4 percent), and Connecticut (19.3 percent). The state with the largest year-over-year decline in distressed sales share was Nevada, which experienced a drop of 7 percentage points in May. The state with the largest decline since its peak was California, where the distressed sales share has dropped 58.1 percentage points from its peak of 67.5 percent experienced in January 2009. In May 2015, CoreLogic reported that only one state plus the District of Columbia were within one percentage point of their pre-crisis distressed sales share.
The three Core-Based Statistical Areas with the largest share of distressed sales based on loan count were all located in Florida – Orlando-Kissimmee-Sanford (24.6 percent), Miami-Miami Beach-Kendall (23.3 percent), and Tampa-St. Petersburg-Clearwater (22.9 percent). Rounding out the top five CBSAs were Chicago-Naperville-Arlington Heights, Illinois (22.2 percent) and Baltimore-Columbia-Towson, Maryland (20.1 percent).