Monday, January 11, 2010

Distressed Sales: Sacramento as an Example

by Bill McBride on 1/11/2010 04:56:00 PM

NOTE: I expect the use of short sales to increase nationwide in 2010. Since the Sacramento Association of REALTORS® is breaking out monthly resales by equity sales (conventional resales), and distressed sales (Short sales and REO sales), I'm following this series as an example to see changes in the mix in a former bubble area.

Distressed Sales Click on graph for larger image in new window.

Here is the December data.

They started breaking out REO sales in 2008, but they have only broken out short sales since June 2009. About 66 percent of all resales (single family homes and condos) were distressed sales in December.

Distressed Sales The second graph shows the percent of REO and short sales (and total distressed sales). The percent of REOs has been declining, but the percent of short sales has been steadily increasing, from 16.7% in June to 24.7% in December.

When the trial modification period ends, the REO sales will probably increase. Also, I expect short sales to be higher in 2010 than in 2009 (there is more emphasis on short sales and deed-in-lieu of foreclosure now).

Total sales in December were off 14.3% compared to December 2008; the seventh month in a row with declining YoY sales.

On financing, over half the sales were either all cash (24.6%) or FHA loans (27.5%), suggesting most of the activity in distressed former bubble areas like Sacramento is first time home buyers using government-insured FHA loans, and investors paying cash.