Distressed sales, including real estate-owned and short sales, made up 8.8% of total home sales in April, a decrease of 3% from last year and 1.7% from March, according to this month’s report by CoreLogic.
REO sales made up 5.7% and short sales made up 3% of total home sales in April. REO sales dropped 2.4 percentage points from last year to its lowest for the month of April since 2007. Short sales hovered between 3% and 4% since 2014.
Distressed sales hit their peak in January 2009 when they totaled 32.4% of all sales. REO sales made up 27.9% of market sales.
Distressed sales play an important role in clearing the housing market of foreclosed properties, however 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 — the pre-crisis share of distressed sales was traditionally about 2%. If the current year-over-year decrease in the distressed sales share continues, it will reach that historically normal 2% mark in mid-2017.
All but seven states recorded less distressed sales than last year, according to CoreLogic. The state with the largest share of distressed sales in April was Maryland at 19.5%. Connecticut came in second at 18.6%, followed by Michigan at 18.1%, Florida at 16.4% and Illinois at 16.3%.
The state with the lowest distressed sales share in April was North Dakota at 2.4%. Florida had the largest drop of any state at 5.3 percentage points.
Oil states also continued to see declines in distressed sales with declines of 1.3 percentage points in Texas, and 0.2 percentage points in Oklahoma and North Dakota.
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(Source: CoreLogic)
[Correction July 20: A previous version of this report stated distressed sales would reach pre-crisis rates in 2018. It is now updated to reflect the correct date. ]
