The total distressed sales, including short sales and real estate-owned (REO), for April 2016, fell again this month putting these sales 3 percentage points below April of 2015 and 1.7 percentage points from the previous month, March 2016, according to recent data released by CoreLogic. If the current year-over-year decrease in the distressed sales share continues, it will reach that “normal” 2-percent mark in mid-2017.
“CoreLogic has reported that the foreclosure rate nationwide fell by 25% 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,” said CoreLogic’s Chief Economist, Frank Nothaft.
Data showed that REO sales accounted for 5.7 percent of total home sales in April 2016 and short sales accounted for 3 percent. The REO sales share was 22.2 percentage points below its peak of 27.9 percent in January 2009. 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.
Distressed sale shares for this reported month fell in most states, including the oil markets. 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 a larger role in emptying the housing market of foreclosed properties, according to CoreLogic they sell at a discount to non-distressed sales, and by doing so can pull down the prices of non-distressed sales. CoreLogic states that there will always be some level of distress in the housing market.
“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,” stated Nothaft. “As lenders have worked through troubled loans, either through foreclosure proceedings or through loan modifications, the foreclosure inventory has continued to fall.”
For April 2016, all but seven states recorded lower distressed sales shares compared with a year earlier. Maryland had the largest share of distressed sales of any state with 19.5 percent in April 2016 and North Dakota had the smallest distressed sales share with 2.4 percent. Oil states continued to see year-over-year declines in their distressed sales shares in April 2016 including Texas with a 1.3 percentage point decrease, and Oklahoma and North Dakota with both a 0.2 percentage point decrease.
Florida had a 5.3 percentage point drop in its distressed sales share from the previous year making it the largest decline of any state, and California had the largest improvement of any state with its peak distressed sales share falling 60.1 percentage points from its January 2009 peak of 67.5 percent. Additionally, only North Dakota and the District of Columbia are close to their pre-crisis levels, each sitting within one percentage point of that level.
“CoreLogic has reported that the foreclosure rate nationwide fell by 25% 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,” says Nothaft.