Real estate comeback? It's distressed sales
SANTA ANA
• Distressed sales made up 29 percent of all home sales in January
• Central Valley cities make the list again 
Nearly one out of every three (29 percent) of homes sold in the nation in January were so-called "distressed" sales - short sales or sales of property claimed by lenders in foreclosures, according to a new report Thursday from real estate information company First American CoreLogic of Santa Ana.
A year earlier -- January 2009 -- distressed sales accounted for 32 percent of all sales transactions.
After peaking in January of last year, the distressed sales share fell to 23 percent in July, before rising again in late 2009 and continuing into 2010, says the report.
Distressed sales are non-arms length transactions such as REO or short sales. Market sales are arms-length transactions between a willing buyer and willing seller and they exclude distressed sales. Distressed sales have a very strong influence on home price trends and are an indicator of a housing market's health.
The rebound in distressed sales occurred due to increases in both the REO (bank owned) and short sales shares, says First American CoreLogic.
The REO share increased to 22 percent in January 2010, up from 19 percent in December but down from a year ago when it was 27 percent (Figure 1). Short sales accounted for 8 percent of all sales in January, up from 7 percent in December and 5 percent a year ago.
During the last 12 months, there were 974,000 distressed sales: 740,000 were REO sales and 234,000 were short sales.
Among the largest 25 markets, Riverside, in Southern California, had the largest percentage of distressed sales in January (62 percent), followed closely by Las Vegas (59 percent) and Sacramento (58 percent).
The top REO market was Detroit where the REO share was 48 percent, followed closely by Riverside (47 percent) and Las Vegas (45 percent). San Diego's short sale share was 19 percent in January, making it the highest ranked short sale market, followed by Sacramento (18 percent) and Oakland (16 percent).
"Clearly there is a non-linear price response to distressed sales," says the report. "At low shares of distress, the price discount for distressed sales relative to market sales is high as the very few properties that are distressed are highly so. Examples of low distress/high price discount markets are Tulsa and Pittsburgh. At moderate to higher levels of distress, the price discount rises with the increase in the distressed sale share as expected.
"However, at very high distressed sale shares the price discount is much lower, which means that the prices in the two markets (distressed and non-distressed) begin to converge into one large distressed market.
"Examples of very distressed markets where the gap between distressed and non-distressed prices is small include Modesto, Bakersfield and Stockton" in the Central Valley, the report says.
Methodology
The home sales data was extracted from First American CoreLogic's public record property transactions database that covers over 2,200 counties in the US. These sales cover about 85% of all sales transactions. Real estate owned (REO) transactions are bank owned properties that are sold to a third party and recorded as deed transfers. Short sales are identified by comparing the sales price to the 1st and 2nd lien mortgage amounts (which includes cash-out refinances) to determine the total amount of mortgage debt. If the sales price is less than the debt amount, it's considered a short sale.
Source: Central Valley Business Times
For more questions about distressed sales, please contact the following:
BBT Real Estate Group Team
Keller Williams Preferred Properties
9701 Apollo Drive, Suite 102
Largo, MD 20774
Phone: 240-737-5024
EFax: 240-296-5024
Email: shortsales@bbtrealestategroup.com
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