Distressed property sales reached a new cyclical low in the past two months. Only 15 percent of all transactions were classified as being due to a foreclosure or needing a short-sale approval from a bank. This is a marked change from nearly one-third of all sales being distressed from 2008 to 2011. Last year, the figure decreased to 26 percent. This year, it is likely to hit 17 percent for the entire year.
Better news yet – distressed sales will hit 11 to 13 percent in 2014, and then fall to a single-digit percentage in 2015. Why? The number of seriously delinquent mortgages in the pipeline has been steadily falling. With fewer in the pipeline, fewer distressed properties will show up as for-sale. Fewer distressed home sales also mean higher home prices. Higher prices in turn mean more people getting lifted out of the underwater status and hence will not face a distressed situation.
Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.