A distressed property index rose to 48.6% in March – the second highest level in the past 12 months while owner-occupant home purchases slowed during the same time period according to another index. The Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, a monthly measure of housing and mortgage usage patterns, generates both of the indexes. The HousingPulse Distressed Property Index indicated nearly half of the housing market is now distressed properties. This trend is likely to continue as a backlog of foreclosures and mortgage defaults make their way through the housing pipeline, according to the survey. The HousingPulse Homebuyer Traffic Index for current and first-time homebuyers both fell from 52.5 to 52.1. Meanwhile, the HTI for investors was nearly flat, registering 57.1 in February and 57.2 in March. A significant number of respondents commented on the problems that the high proportion of distressed properties is causing for the appraisal system. When many properties are distressed, it is often difficult for appraisers to find recently sold nondistressed properties to gauge value, Campbell/Inside Mortgage Finance said. Also, short sales boomed in March and the proportion of damaged REO fell. Short sales rose from 17% in February to a record-high 19.6% in March. Damaged REO fell from 14.9% in February to 12% in March. Because damaged REO has the worst effect on comparables used for appraisals, smaller amounts of damaged REO should affect appraisals less in future months, according to the data. Campbell/Inside Mortgage Finance surveys more than 3,000 real estate agents nationwide each month for the indexes. Write to Shaina Zucker.