Distressed homes – sold at discount – accounted for a 39 percent market share in February, up from 37 percent in January and 35 percent in February 2010.
Forty-two percent of Minnesota’s homes on the market are distressed properties.
Bottom Line: Distressed properties have a major impact on house values in a marketplace. Where there is a large percentage of distressed properties, home prices will continue to soften until we work our way through this inventory.
The map below shows the number of months it would take to clear the shadow inventory by state. The months’ supply is estimated by dividing the shadow inventory and the monthly number of distressed sales. The numbers range broadly from 51 months in New Jersey to 7 months in Nevada. When looking at months’ supply it is important to keep in mind that this estimate highly depends on saturation of distressed sales. Given that New Jersey over the past year on average reported about 20 percent of existing home sales to be distressed sales, it will take a longer period for the shadow inventory to clear. In contrast, Nevada’s distressed sales averaged a considerable 70 percent share of the existing sales and at that rate the current shadow inventory would clear in 7 months.
Bottom Line: Appreciation of residential real estate will not take place until a region works their way through the shadow inventory that exists. This map gives you an indication of when that will occur in your state.
