RealEstateEconomyWatch.com

Almost half of the homes sold in January were foreclosures or short sales, the highest level of distressed sales in nearly a year, according to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey.

The survey also found that fewer homes where purchased by first-time buyers during the month- the result of more expensive financing options and tightened mortgage underwriting standards.

The survey’s HousingPulse Distressed Property Index or DPI, a key indicator of the health of the housing market. rose sharply.  The share of total transactions involving distressed properties climbed from 47.2 percent in December to 49.6 percent in January. The increase was a continuation of a trend as the DPI registered just 44.5 perdent back in November.

At the current rate of increase, distressed property transactions could account for the majority of home sales within just a few months. Already, in the key state of California, distressed property transactions account for 66 percent of the market. In Florida, distressed property transactions account for 63 percent of the market. And in the combined area of Arizona and Nevada, distressed property transactions are a stunning 72 percent of home sales.

Comments from real estate agents collected as part of the HousingPulse survey confirmed the growing share of distressed properties. “I have noticed that less than 40 percent of what is on the market is property that is just ‘For Sale’ and not a short sale or REO,” commented one agent in California. “We are primarily an REO/short sale market with (only) about 20 percent conventional sale at this juncture,” added an agent in Nevada. “Short sales occupy 65 percent of market share, REO’s occupy 30 percent of market share, non-distressed are 5 percent or less,” reported another agent in Nevada.

The latest HousingPulse survey also found a sharp dip in first-time homebuyer activity last month. The drop came at the same time long-term mortgage rates climbed to above 5 percent and FHA hiked the fees associated with low down payment mortgages. The first-time homebuyer share of home sales was 35.0 percent in January, down from 37.7 percent in December. FHA lending also took a tumble, falling from 30.2 percent