The volume of distressed homes in the lower ranges has provided the fuel for the decline in pricing.  77% of all distressed properties are priced below $500,000 and 94% are priced below $750,000.  Short sales and foreclosures now make up 36% of the current active inventory versus 35% two weeks ago.  There are now 5,576 distressed properties on the market.  The overwhelming majority, 81%, are short sales, sellers with loan balances that exceed the current market value and are "subject to lender approval."   For short sales, there are currently 4,504 active listings and demand is at 544 escrows.  The expected market time is at 8.28 months, dropping from 9.86 months two weeks ago.  But, this statistic is extremely misleading, just ask a buyer searching for a home.  A large portion of the 4,504 active listings already have secured an offer on the property signed by both the buyer and seller, yet they remain active on the market.  The reason is that there is also a signed short sale agreement that allows the seller to continue to actively market their home until formal lender approval occurs.  This process takes anywhere from a couple of weeks to months.  Unfortunately, there is no way of knowing which short sale listings already have an agreed upon offer submitted to the bank other than contacting the listing agent directly for their verbal answer.  So, true demand in Orange County is actually understated.  The word on the street is that close to 50% of all active short sale listings already have an agreed upon offer submitted to the lender.  If those were to be truly changed to "pending escrow" status, the demand count would increase considerably, the inventory would drop and the market time would drop as well.  Unfortunately, not all short sales with offers submitted for lender approval are actually approved.  Roughly 1 out of 3 are accepted.  Many are rejected because they are priced too far under their true market value.  With increased demand comes more realistic pricing of short sales.  As this year progresses, expect the lender acceptance rate to grow closer to 1 out of 2.