The real estate recovery has been extremely uneven. In some markets, prices have risen by well into the double digits. However, many of these markets are in areas such as Nevada, California and Florida, where home values dropped by more than a third when the housing bubble burst.
Foreclosures, and the distressed home sales that are part of the process of selling foreclosed inventory, were driven primarily by two factors. The first was subprime mortgages, often marketed with low monthly payments during the first few years of the loan, followed by much higher payments, or balloon payments that could represent most of the entire value of the mortgage. The other was unemployment levels rarely reached in the years since the Great Depression. The national rate climbed to more than 10%. However, in some cities, the figure was above 15%.
Distressed home sales are still remarkably high in some cities — more than 20% of total sales. Distressed sales are defined as short sales plus sales of homes for which the lender or its agent has possession, or real estate owned (REO).
Distressed homes sales are a two-edged sword. They help clear the inventory of unsold homes, which in theory should improve the price owners get for their houses in a period of low supply. One the other hand, the sales of distressed homes often are made below market value as banks and other financial institution attempt to clear their books of unwanted real estate.
Not surprisingly, the markets that had the highest percentage of distressed sales in the 12 months that ended in January were dominated by markets that collapsed in 2008, 2009 and 2010. Of the eight with distressed sales of more than 20% of the total, five are in central California, Florida or the Detroit area.
Market 12 Month Sales Through January Percentage Distressed Homes
Chicago 100,155 29.5%
Orlando 57,057 27.6%
Atlanta 102,988 25.1%
Tampa 70,385 25.1%
Warren, Mich. 47,730 24.7%
Riverside, Calif. 73,428 23.2%
St Louis 48,509 22.2%
Sacramento 39,220 21.8%
Of these eight markets, the Chicago area had the greatest month’s supply of distressed homes at 9.5, followed by Tampa at 8.2 and Orlando at 8.1. Warren area had a bit less than three months supply of distressed homes.
By state, the greatest share of distressed sales in February occurred in Michigan (31.4%), Nevada (28.1%), Illinois, (26.5%) Florida (24.7%) and Georgia (23.4%).
Is Your Money Earning the Best Possible Rate? (Sponsor)
Let’s face it: If your money is just sitting in a checking account, you’re losing value every single day. With most checking accounts offering little to no interest, the cash you worked so hard to save is gradually being eroded by inflation.
However, by moving that money into a high-yield savings account, you can put your cash to work, growing steadily with little to no effort on your part. In just a few clicks, you can set up a high-yield savings account and start earning interest immediately.
There are plenty of reputable banks and online platforms that offer competitive rates, and many of them come with zero fees and no minimum balance requirements. Click here to see if you’re earning the best possible rate on your money!
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
