Distressed sales, which include real estate-owned (REO) and short sales, were down 2.9 percentage points year-over-year in February 2016 and down 0.4 percentage points from January 2016, reports Molly Boesel of CoreLogic.
Distressed sales accounted for 11.1% and REO sales accounted for 7.8% of total sales in February 2016. At its peak in January 2009, distressed sales totaled 32.4% of all sales, with REO sales representing 27.9% 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%. If the current year-over-year decrease in the distressed sales share continues, it will reach that “normal” 2% mark in mid-2018.