Tuesday, February 16, 2010

Distressed Sales: Sacramento as an Example

by Bill McBride on 2/16/2010 02:43:00 PM

This will probably be the year of the "short sale", especially after the Home Affordable Foreclosure Alternatives starts (scheduled for April 5th).

The Sacramento Association of REALTORS® is breaking out monthly resales by equity sales (conventional resales), and distressed sales (Short sales and REO sales), and I'm following this series as an example to see mix changes in a distressed area.

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

Here is the January data.

The Sacramento Association started breaking out REO sales in 2008, but they have only broken out short sales since June 2009. Almost 69 percent of all resales (single family homes and condos) were distressed sales in January.

Note: This data is not seasonally adjusted, and the decline in sales from December to January was about normal.

Distressed Sales The second graph shows the percent of REO and short sales (and total distressed sales). The percent of REOs had been declining, and the percent of short sales had been steadily increasing. In January REOs were up to 45% - the highest percent since last September - and the percent short sales declined slightly to 23.6%.

Now that the trial modification period has ended, I expect the REO sales to increase. Also, I expect the percentage of short sales to be higher in 2010 than in 2009 - but probably not as high as foreclosures (it will be interesting to watch).

Also total sales in January were off 23.4% compared to January 2009; the eight month in a row with declining YoY sales.

On financing, over half the sales were either all cash (26.7%) or FHA loans (28.5%), 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.