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Less Distress On The Home Front

August 27,2014

The latest snapshot of the housing economy by California Association of Realtors ( August 26) shows how far the housing recovery has come in the past year.

Simply put – there are fewer distressed sales in the marketplace with  the state’s overall numbers dropping about 50% in this category from just year ago.

The category includes properties held by banks for resale (foreclosed) as well as short sales, in essence properties that were upside down.

Dramatic Drops Here

In our reading area the drop is fairly dramatic. In San Luis Obispo County distressed sales fell from 9 percent of all sales a year ago to just 5% this July. In the Central Valley were the percentage was much larger the one year improvement shows as well. In Fresno County distressed sales had made up as much as 32% of all sales in July 2013 but has now dropped to 17%. In Tulare County it was 31% a year ago but down to 18% in July 2014 (see list).Screen Shot 2014-08-27 at 9.30.18 AM

Statewide the share of equity sales – or non-distressed property sales – continued its upward trend, inching up in July to 90.6 percent, up from 90.3 percent in June. Equity sales have been rising steadily again since the beginning of this year. Equity sales have been more than 80 percent of total sales for more than two years and have risen above 90 percent for the second straight month. Equity sales made up 82.8 percent of sales in July 2013.

The combined share of all distressed property sales declined further in July, dropping from 9.7 percent in June to 9.4 percent in July. Distressed sales continued to be down more than 50 percent from a year ago, when the share was 17.2 percent.

Twenty-one of the 41 reporting counties showed a month-to-month decrease in the share of distressed sales, with 20 of the counties recording in the single-digits, including Alameda, Contra Costa, Marin, Orange, Plumas, San Diego, San Luis Obispo, San Mateo, Sonoma, and Santa Clara counties — all of which registered a share of five percent or less.

Of the distressed properties, the share of short sales fell to its lowest level since February 2008, falling to 4.9 percent in July, down from 5 percent in June. July’s figure was less than half the 11.6 percent recorded in July 2013.

In the SLO area broker Keith Byrd’s blog shows the housing market recovering from a high of 40% distressed properties (the short sales and REOs) in 2009 to just 5% today (see chart).

Screen Shot 2014-08-27 at 10.44.08 AM


In a related  story CoreLogic® released its July National Foreclosure Report, which provides data on completed U.S. foreclosures and foreclosure inventory. According to CoreLogic, for the month of July 2014, there were 45,000 completed foreclosures nationally, down from 57,000 in July 2013, a year-over-year decrease of 21.2 percent. On a month-over-month basis, completed foreclosures were down by 8.5 percent from the 49,000* reported in June 2014. As a basis of comparison, before the decline in the housing market in 2007, completed foreclosures averaged 21,000 per month nationwide between 2000 and 2006.

Completed foreclosures are an indication of the total number of homes actually lost to foreclosure. Since the financial crisis began in September 2008, there have been approximately 5.1 million completed foreclosures across the country.

As of July 2014, approximately 640,000 homes in the United States were in some stage of foreclosure, known as the foreclosure inventory, compared to 976,000 in July 2013, a year-over-year decrease of 34.4 percent. The foreclosure inventory as of July 2014 made up 1.6 percent of all homes with a mortgage, compared to 2.4 percent in July 2013. The foreclosure inventory was down 3.3 percent from June 2014, representing 33 months of consecutive year-over-year declines.

“The stock of distressed debt continues to rapidly decline, especially in western states,” said Sam Khater, deputy chief economist at CoreLogic. “The number of seriously delinquent loans fell by more than 25 percent from the prior year in 10 states and seven of those states were in the west.”

“Based on current trends, the overall foreclosure inventory could trend down to as low as 500,000 homes by year-end which is very positive news for the housing market. The picture is considerably brighter in the non-judicial states which maintain consistently lower foreclosure stocks and, in general, lower levels of serious delinquency,” said Anand Nallathambi, president and CEO of CoreLogic. “In total, there are now 36 states with an inventory of foreclosed homes lower than the national rate of 1.7 percent.”

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