REO sales are not what they used to be. In fact, in June, REO sales hit their lowest point in nine years,according to a new report by CoreLogic.
Overall distressed sales in June accounted for 8 percent of U.S. sales. REOs accounted for 5 percent, which is a far cry from January of 2009, when REOs made up 30 percent of U.S. home sales. REO sales in June were 2 percent below last June and at their lowest for any month since September 2007.
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. With this in mind, REO sales continued decrease contributes to the home price increase of 5.3 percent seen earlier this month.
California had the largest improvement of any state from its peak distressed sales share, falling 60.6 percentage points from its January 2009 peak of 67.5 percent.
“There will always be some level of distress in the housing market,” CoreLogic reported. “If the current year-over-year decrease in the distressed sales share continues, it will reach that ‘normal’ 2-percent mark in mid-2019.”
Only eight states recorded increases in their distressed sales shares in June, when compared to a year ago, CoreLogic reported. Maryland had the largest share of distressed sales, with 19.4 percent. The Baltimore area had the largest share of distressed sales of any city as well, 19 percent. Connecticut came a close second in states with the most distressed sales, 18.4 percent. Michigan had 17.6 percent in June; Illinois and New Jersey also each reported distressed sales above 15 percent.
Meanwhile, North Dakota, despite having nagging concerns with its energy industry and the fallout on home growth, had the smallest distressed sales share in June, 2.5 percent. It also saw a 0.1 percentage point year-over-year declines in distressed sales.
Similarly, oil states continued to see year shares in June. Texas saw a 1.2 percentage point decrease and Oklahoma saw a 0.5 percent decrease. Florida, though, led states in decreased declines, with nearly a 6 percent drop in its distressed sales share from a year earlier.
While some states stand out as having high distressed sales shares, only North Dakota and the District of Columbia are close to their pre-crisis levels, each within one percentage point.