Sales of distressed homes (REO and short sales) fell to their lowest level in seven years and foreclosure inventory dropped by 34% year-over-year in December 2014, according to CoreLogic's February 2015 The MarketPulse report released on Tuesday.
Distressed home sales (REO and short sales) made up 12.8% of total home sales in December 2014, the lowest percentage reported for any one month since December 2007 at the beginning of the financial crisis. December's percentage was a 2.8% decline from the same month a year earlier and a decline of 1.2 percent from a month earlier, according to CoreLogic. REO sales accounted for 8.8% of December's distressed home sales share while short sales accounted for 4%.
"The ongoing shift away from REO sales is a driver of improving home prices, as REOs typically sell at a larger discount than do short sales, " CoreLogic senior economist Molly Boesel said. "There will always be some amount of distress in the housing market, so one would never expect a 0 percent distressed sales share, and by comparison, the pre-crisis share of distressed sales was traditionally 2%."
Distressed home sales hit their peak in January 2009 when they accounted for 32.4%of all home sales (REO sales made up 28% of that share).
Meanwhile, CoreLogic reported that about 552,000 residential homes, or about 1.4% of all homes with a mortgage nationwide, were in some state of foreclosure in December 2014 – a 34% decline from December 2013, when 840,000 homes (2.1% of all homes with a mortgage) were in foreclosure.
December marked 38 consecutive months of year-over-year declines in foreclosure inventory and 23 straight months with year-over-year declines of 20% or more, according to CoreLogic. Also experiencing large year-over-year declines were the 12-month sum of foreclosures, which totaled approximately 563,000 for the entire year of 2014 – a decline of 14.9% from the sum of completed foreclosures for 2013. The number of seriously delinquent mortgage loans (those 90 days or more overdue or in foreclosure) fell to 1.6 million in December 2014, a decline of 21.6 percent from the same month a year earlier.