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Sunday, January 19, 2014

Lawler: Updated Table of Distressed Sales and Cash buyers for Selected Cities in December

by Calculated Risk on 1/19/2014 11:56:00 AM

Note: The NAR will release existing home sales and inventory for December this coming Thursday. It is also interesting to look at the trend for distressed sales (foreclosures and short sales), and for all cash buyers (frequently investors).

Economist Tom Lawler sent me the updated table below of short sales, foreclosures and cash buyers for several selected cities in December.

From CR: Total "distressed" share is down in all of these markets, and down significantly in most.

Short sales are down sharply in all of these markets (this was a real change in 2013, and I expect further declines in short sales in 2014).

Important Note on short sales: Historically the IRS has considered debt forgiveness (like short sales) as taxable income. In 2007, Congress passed a measure to exempt most forgiven mortgage debt from being considered taxable income (this helped increase short sale activity). This measure expired on Dec 31, 2013. However, according to a letter from the IRS:

"[I]f a property owner cannot be held personally liable for the difference between the loan balance and the sales price, we would consider the obligation as a nonrecourse obligation. In this situation, the owner would not treat the cancelled debt as income."
So in states that passed anti-deficiency provisions (like California), this means many loans will be considered nonrecourse by the IRS (and forgiven debt will not be taxed). In other states, forgiven debt will be taxed.  

Foreclosures are down in all of these areas too (except Springfield, Ill).

The All Cash Share (last two columns) is mostly declining year-over-year.  It appears investors are pulling back in markets like Las Vegas and SoCal - probably because of fewer distressed sales and higher prices.

Short Sales ShareForeclosure Sales Share Total "Distressed" ShareAll Cash Share
Las Vegas20.7%45.8%8.5%9.5%29.2%55.3%44.4%55.2%
Mid-Atlantic 8.0%13.0%9.3%9.7%17.3%22.7%19.3%20.3%
California *15.5%26.7%6.7%15.8%22.2%42.5%  
Bay Area CA*10.5%23.6%4.5%12.1%15.0%35.7%22.5%29.9%
So. California*13.2%26.7%5.8%14.2%19.0%40.9%27.7%35.8%
Hampton Roads    29.1%31.7%  
Northeast Florida    36.2%42.7%  
Toledo      36.5%41.6%
Tucson      32.3%33.1%
Des Moines      23.1%21.6%
Omaha      23.9%20.6%
Pensacola      35.5%32.7%
Wichita      30.2%30.6%
Memphis*  21.0%25.6%    
Birmingham AL  22.5%34.0%    
Springfield IL**  17.7%14.2%    
*share of existing home sales, based on property records
**Single Family Only