Nationally, the proportion of short sales and REO (Real Estate Owned) sales rose 2.2 percentage points in Q1 2015. The nation has not observed an increase this large since Q1 2012, when distressed saturation hit its peak nationwide at 38%.
The rise in distressed property sales in Q1 2015 comes on the heels of home price moderation across the country since the end of 2013 and throughout 2014.
The national distressed (short sales and REOs) saturation rate of 18.9% distributes regionally with 13.7% of sales in the West, 23.2% in the South, 15.1% in the Northeast, and 22.1% in the Midwest.
Quarter-over-quarter, all four regions saw an increase in distressed saturation. The West increased by 1.4 percentage points, the South by 2.1, the Northeast by 2.6, and the Midwest with the largest gain of 3.8 percentage points.
Investors seeking low prices with high yield took advantage of distressed opportunities, helping some of the recession’s hardest hit metros. They reduced high rates of distressed saturation by creating demand in the absence of traditional home buyers at the start of the recovery. In turn, this helped drive up prices in key recovering MSAs (Metropolitan Statistical Areas).
With the West seemingly tapped out of these deals, the distressed migration moves south to hotspots like Florida. (See Map 2.)
It should come as no surprise that the Northeast and Midwest, the two regions with the largest increase in distressed saturation, are made up of 78% and 67% of judicial processing states, respectively.