Magazine article Mortgage Banking

Going with the Flow

Magazine article Mortgage Banking

Going with the Flow

Article excerpt

Distressed properties still account for an abnormally high share of properties in many parts of the country. But the good news is the inventory is declining.

The trend is creating a virtuous circle. Because distressed homes often sell at a discount, shrinking that inventory ends up boosting overall home prices--thus lifting some underwater borrowers into the buy/sell zone. That, in turn, unlocks additional inventory for sale, which partly offsets the shortage of homes for sale. That also keeps prices from spiking into untouchable territory, thus keeping overall sales from tanking.

In its report on June existing-home sales, the National Association of Realtors[R] (NAR), Chicago, said the distressed-homes share of June sales dropped to 15 percent--down from 18 percent in May. The June number was the lowest share since NAR began tracking this statistic in October 2008.

By comparison, distressed sales accounted for 26 percent of existing-home sales in June of last year. So there's no question that what we're seeing now is major improvement.

To illustrate this from another vantage point, consider that the housing market with the highest share of distressed sales in our Marketrac section this month is Las Vegas, with a 36.72 percent share. One year ago the highest distressed-sale share was also in Las Vegas--but with a share of 51.81 percent, according to the CoreLogic data provided for the August 2012 issue. This is yet more proof that distressed properties are getting sold and clearing out of the pipeline. …

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