Distressed Property Index Hits 49.6% in January
First-Time Homebuyers Scale Back Their Purchase Activity
WASHINGTON, D.C. (February 22) –
ominous sign for the still fragile U.S. housing market, the percentage
of distressed properties in home purchase transactions climbed to the
highest level in nearly a year in January. Meanwhile, first-time
homebuyer activity fell sharply last month – the result of more
expensive financing options and tightened mortgage underwriting
are the major findings of the latest Campbell/Inside Mortgage Finance
HousingPulse Tracking Survey, conducted this month.
Perhaps the biggest news in the January data was a sharp rise in the
HousingPulse Distressed Property Index or DPI, a key indicator of
the health of the housing market. The DPI, or share of total
transactions involving distressed properties, climbed from 47.2% in
December to 49.6% in January. The increase was a continuation of a trend
as the DPI registered just 44.5% back in November.
the current rate of increase, distressed property transactions could
account for the majority of home sales within just a few months.
Already, in the key state of California, distressed property
transactions account for 66% of the market. In Florida, distressed
property transactions account for 63% of the market. And in the combined
area of Arizona and Nevada, distressed property transactions are a
stunning 72% of home sales.
Comments from real estate agents collected as part of the
HousingPulse survey confirmed the growing share of distressed
properties. “I have noticed that less than 40% of what is on the market
is property that is just ‘For Sale’ and not a short sale or REO,”
commented one agent in California. “We are primarily an REO/short sale
market with (only) about 20% conventional sale at this juncture,” added
an agent in Nevada. “Short sales occupy 65% of market share, REO's
occupy 30% of market share, non-distressed are 5% or less,” reported
another agent in Nevada.
latest HousingPulse survey also found a sharp dip in first-time
homebuyer activity last month. The drop came at the same time long-term
mortgage rates climbed to above 5 percent and FHA hiked the fees
associated with low downpayment mortgages. The first-time homebuyer
share of home sales was 35.0% in January, down from 37.7% in December.
FHA lending also took a tumble, falling from 30.2% of financing options
in December to 27.7% in January.
increase in distressed properties, combined with a reduction in
first-time homebuyers, is causing downward pricing pressure to build in
the market, especially for the categories of damaged REO and move-in
ready REO. Over the past 12 months, time on market for the REO
categories has strongly increased while the average number of offers has
decreased. Also over the past 12 months, average prices for damaged REO
have declined by 16% while average prices for move-in ready REO have
declined 20%. Non-distressed prices have declined only 4% while the
prices for short sales have been nearly flat.
more information on the survey, contact John Campbell at Campbell
Surveys at (202) 363-2069 or