What’s the True Impact of Distressed Properties?

by Chicago Agent

CoreLogic's latest HPI offers strong evidence of how influential distressed sales are on home values.

We’ve officially entered the home price index season for the month, and it seems like every day a new index is released with vaguely similar findings on the state of the housing market.

CoreLogic’s Home Price Index (HPI), though, the most cited index next to the Case-Shiller, offered some distinguishing factors in its latest release that highlighted the true impact of distressed properties on the country’s real estate.

We previously reported on the HPI, and its findings were somewhat expected – a 1.4 percent decline in home values from October to November, and a 4.3 percent decline from November of 2010. As a CoreLogic press release on the HPI indicates, though, those numbers are only half the story.

Excluding distressed property sales, which CoreLogic defines as short sales and foreclosure transactions, year-over-year prices declined by just 0.6 percent in November, a huge decline of 3.7 percentage points.

State-by-state, the results were even more dramatic, particularly in the index’s rankings of state performance. For instance, counting distressed sales, the five states with the highest year-over-year price appreciation were: Vermont (+4.3 percent), South Carolina (+2.8 percent), District of Columbia (+2.1 percent), Nebraska (+1.9 percent) and New York (+1.7 percent).

The layout, though, is quite different when distressed properties are not included: Maine (+4.9 percent), South Carolina (+4.9 percent), Montana (+3.8 percent), Indiana (+3.3 percent) and Louisiana (+2.4 percent).

The top results for price depreciation were even more marked, when the distressed sales quotient was added and subtracted. When counting distressed sales, the states with the greatest price depreciation were: Nevada (-11.2 percent), Illinois (-9.7 percent), Minnesota (-7.8 percent), Georgia (-7.7 percent) and Ohio (-7.2 percent).

When not counting distressed sales, the top states were: Nevada (-8.8 percent), Arizona (-4.9 percent), Minnesota (-4.7 percent), Idaho (-4.1 percent) and Georgia (-3.6 percent). Only Nevada and Minnesota were consistent across the two measures, as the other three states, including our own Illinois, were not present when underwater inventories were not factored in, which shows not only the relative health of the respective markets, but the damaging impact of distressed properties on a housing market’s general health.

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