Distressed sales – real estate-owned (REO) and short sales – accounted for 9.9 percent of total home sales nationally in May 2015, down 2.8 percent from May 2014 and down 1.7 percent from April 2015. Distressed sales shares typically decrease month-over-month in May due to seasonal factors, and this distressed sales share was the lowest for the month of May since 2007, when it was 5 percent.

Within the distressed category, REO sales accounted for 6.4 percent and short sales made up 3.5 percent of total home sales in May 2015. The REO sales share was the lowest since October 2007m when it was 6 percent. The short sales share fell below 4 percent in mid-2014 and has remained stable since then. The ongoing shift away from REO sales is a factor of improving home prices; bank-owned properties typically sell at a larger discount than short sales. If the current year-over-year decrease in the distressed sales share continues, it would reach a “normal” 2-percent mark in mid-2018.

Michigan had the largest share of distressed sales of any state at 21.4 percent in May 2015, followed by Florida (21.3 percent), Maryland (20.3 percent), Illinois (19.4 percent) and Connecticut (19.3 percent).