Housing Trends: Distressed Sales Update April 2016

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Distressed Sales Accounted for 9 Percent of Homes Sold Nationally in April 2016

  • Of total sales in April 2016, distressed sales accounted for 8.8 percent and real estate-owned (REO) sales accounted for 5.7 percent
  • The REO sales share was 22.2 percentage points below its peak of 27.9 percent in January 2009
  • Distressed sales shares fell in most states, including the oil markets

Distressed sales, which include REO and short sales, accounted for 8.8 percent of total home sales nationally in April 2016, down 3 percentage points from April 2015 and down 1.7 percentage points from March 2016.

Within the distressed category, REO sales accounted for 5.7 percent and short sales accounted for 3 percent of total home sales in April 2016. The REO sales share was 2.4 percentage points below the April 2015 share and is the lowest for the month of April since 2007. The short sales share fell below 4 percent in mid-2014 and has remained in the 3-4 percent range since then. At its peak in January 2009, distressed sales totaled 32.4 percent of all sales, with REO sales representing 27.9 percent of that share. 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. 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-2017.

All but seven states recorded lower distressed sales shares in April 2016 compared with a year earlier. Maryland had the largest share of distressed sales of any state at 19.5 percent[1] in April 2016, followed by Connecticut (18.6 percent), Michigan (18.1 percent), Florida (16.4 percent) and Illinois (16.3 percent). North Dakota had the smallest distressed sales share at 2.4 percent. Oil states continued to see year-over-year declines in their distressed sales shares in April 2016. Texas saw a 1.3 percentage point decrease and Oklahoma and North Dakota both saw a 0.2 percentage point decrease. Florida had a 5.3 percentage point drop in its distressed sales share from a year earlier, the largest decline of any state. California had the largest improvement of any state from its peak distressed sales share, falling 60.1 percentage points from its January 2009 peak of 67.5 percent. While some states stand out as having high distressed sales shares, only North Dakota and the District of Columbia are close to their pre-crisis levels (each within one percentage point).

Of the 25 largest Core Based Statistical Areas (CBSAs) based on mortgage loan count, Baltimore-Columbia-Towson, Md. had the largest share of distressed sales at 19.5 percent, followed by Chicago-Naperville-Arlington Heights, Ill. (18.5 percent), Tampa-St. Petersburg-Clearwater, Fla. (17.9 percent), Orlando-Kissimmee-Sanford, Fla. (17.5 percent) and Newark, N.J. (15.7 percent). Denver-Aurora-Lakewood, Colo. had the smallest distressed sales share at 2.5 percent among this same group of the country’s largest CBSAs. Three of the largest 25 CBSAs had year-over-year increases in their distressed sales share: Nassau County-Suffolk County, N.Y. was up by 1 percentage point, Cambridge-Newton-Framingham, Mass. was up by 0.8 percentage points and Newark, N.J. was up by 0.7 percentage points. Orlando-Kissimmee-Sanford, Fla. had the largest year-over-year drop in its distressed sales share, declining by 7.1 percentage points from 24.6 percent in April 2015 to 17.5 percent in April 2016. Riverside-San Bernardino-Ontario, Calif. had the largest overall improvement in its distressed sales share from its peak value, dropping from 76.3 percent in February 2009 to 10 percent in April 2016.

1 The distressed sales share for states and CBSAs was calculated using sales from the past 12 months.

© 2016 CoreLogic, Inc. All rights reserved.


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