Home sales increased by 8 percent year over year in February to a non-seasonally adjusted annual sales pace of 4.09 million, 3.8 percent higher than 3.94 million pace reported for January. This was the highest sales pace for the month of February since 2007.
Improvement in February home sales were led by newly constructed homes which increased by 23 percent, followed by re-sales which increased by 18 percent. Distressed sales, which include real-estate owned (REO) and short sales, were on the decline, continuing the trend in the shift towards healthy home sales.
Distressed sales accounted for 15.6 percent of total sales in February 2014, a strong improvement from the same time a year ago when they made up 22.8 percent of total sales. REO sales were down 16 percent year over year, making up 11.4 percent of total sales. Short sales were down 44 percent year over year, at just 4.3 percent of total sales in February. At its peak, the distressed sales share totaled 32.7 percent of all sales in January 2009, with REO sales making up 28.2 percent of that share. The more recent shift away from REO sales is a driver of improving home prices, as REOs typically sell at a larger discount compared to healthy sales than do short sales. There will always be some amount of distress in the housing market, so one would never expect a 0-percent distressed sales share, but the pre-crisis share of distressed sales was traditionally about 2 percent.
Michigan had the largest share of distressed sales of any state at 30.5 percent in February, followed by Illinois (26.6 percent), Nevada (26.0 percent), Florida (24.8 percent) and Georgia (23.5 percent). California saw a 17.8 percentage point drop in the distressed sales share, the largest of any state. Of the largest 25 Core Based Statistical Areas (CBSAs), Chicago-Naperville-Arlington Heights, Ill. had the largest share of distressed sales at 29.5 percent, followed by Miami-Miami Beach-Kendall, Fla. (27.9 percent), Las Vegas-Henderson-Paradise, Nev. (27.2 percent), Orlando-Kissimmee-Sanford, Fla. (27.0 percent) and Tampa-St. Petersburg-Clearwater, Fla. (25.5 percent). Sacramento-Roseville-Arden-Arcade, Calif. had the largest drop in its distressed share, falling by 21.7 percentage points from 41.6 percent in February 2013 to 19.9 percent in February 2014.