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Thursday, April 12, 2012

Sacramento: Lowest percentage of Distressed House Sales in years

by Calculated Risk on 4/12/2012 01:21:00 PM

I've been following the Sacramento market to look for changes in the mix of house sales in a distressed area over time (conventional, REOs, and short sales). The Sacramento Association of REALTORS® started breaking out REOs in May 2008, and short sales in June 2009.

So far there has been a shift from REO to short sales, and the percentage of distressed sales has been declining year-over-year. This data would suggest improvement, however we do not know the impact of the mortgage settlement yet (the court signed off on the agreement last week).

In March 2012, 59.6% of all resales (single family homes and condos) were distressed sales. This was down from 70.7% in March 2011, and the lowest percentage of distressed sales since Sacramento started breaking out the data in May 2008. Still almost 60% distressed is extremely high!

Here are the statistics.

Distressed Sales Click on graph for larger image.

This graph shows the percent of REO sales, short sales and conventional sales. There is a seasonal pattern for conventional sales (stronger in the spring and summer), and distressed sales happen all year - so the percentage of distressed sales decreases every summer and the increases in the fall and winter.

There will be probably be more foreclosures following the mortgage servicer settlement, but this is still a sharp increase in conventional sales. In another change, short sales are almost at the same level as REOs.

Total sales were down 2.9% compared to March 2011, but conventional sales were up 34% year-over-year. Active Listing Inventory declined 59.5% from last March, and total inventory, including "short sale contingent", was off 31% year-over-year.

Cash buyers accounted for 32.0% of all sales (frequently investors), and median prices were unchanged from last March (mean prices were up 2.8%).

I've been hoping this data would help determine when the market is improving. Unfortunately the mortgage settlement is a big unknown. Otherwise this would be considered progress, although the market is still in distress.

A few key points:
• Inventory is off sharply year-over-year even including "short sale contingent" listings.
• Conventional sales are up sharply (up 34% from March 2011).
• The median sales price is unchanged from last year (probably because of fewer REOs), and the mean price is up 2.8%.
• This is the lowest percentage of distressed sales since the Sacramento Association started breaking out distressed sales.

We are seeing similar patterns in other distressed areas. This will be interesting to watch over the next few months to see the impact of the mortgage settlement.