CoreLogic: REO sales hit lowest point since housing market implosion
Revises pre-crisis mark by 2 years
Distressed sales, which include real estate owned and short sales accounted for just 8.4% of total home sales in the U.S. in May, according to a recent report by CoreLogic.
This is down 2.1% from last year, and down 1% from April. Distressed sales are down 27.9% from its peak in January 2009.
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In the distressed category, REO sales, those taken back onto bank balance sheets owing to borrower nonpayment, made up 5.4% and short sales made up 3% of total home sales in May.
The REO share was 1.7 percentage points less than last year, and is the lowest share since May 2007, the last time the nation officially experienced an economic recession.
Short sales decreased below 4% in 2014, and has hovered between 3% to 4% since then.
At its peak in January 2009, distressed sales totaled 32.4% of the market sales, and REO sales made up 27.9% of that.
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.
Before the housing crisis, distressed sales averaged around 2% of the total market share. If the current annual decrease continues as its current rate, distressed sales will hit the pre-crisis mark in mid-2019.
Last month, CoreLogic predicted that sales would hit the pre-crisis market by mid-2017, a two-year difference from its current prediction.
All states except eight recorded lower distressed sales in May compared to the year before. Maryland had the largest share of distressed sales at 19.4%, followed by Connecticut at 18.5%, Michigan at 17.8%, Illinois at 16% and Florida at 15.8%.
On the other hand, North Dakota had the lowest share of distressed sales at 2.5%.
Florida had the largest drop of any state at 5.5 percentage points, and California had the largest improvement from its peak when it fell 60.4 percentage points from its 2009 peak of 67.5%.