While the amount of distressed inventory is still high above the normal level of under 5 percent, real estate pros must act like superheroes, roll up their sleeves, and tackle the task of clearing these sales as efficiently as possible.

What is a distressed listing you ask? A distressed listing is a home that typically sells for 15 to 20 percent below market value, which can then cause a drag on home prices overall according to data assembled by the NATIONAL ASSOCIATION OF REALTORS®.

There is an imbalanced housing market in Phoenix, creating a sharp price Phoenix hard money discount on today’s distressed sales. Back when the market was better, a distressed property might be snapped up at market value. However, right now in order to stabilize prices, the market needs stronger home sales volumes to reduce the number of homes on the market. A great sale on a home, resulting in home price growth, will create confidence in the market, but right now, roughly 22 percent of mortgaged home owners are upside down and refinancing to raise their hopes of coming back around.

The best way to fix the ailing housing market is for a stronger economy. Consumer confidence is closely tied to job growth and stock market gains as consumers are constantly citing job concerns –and therefore, money worries- as the main reason for not purchasing a new home.

However, in America, apprehension about the pential spread of Europe’s debt could reduce domestic economic growth. A lack of consensus in Congress over the deficit reduction plan, and a major revision to economic growth in the first half of 2011 combined to send stocks on a roller coaster ride in the second half of 2011. This can directly affect the future feelings on the housing market. In August, consumer confidence fell to its lowest level since the recession began in 2007. Now, neither businesses nor consumers appear willing to drive the economy because they are afraid, and who can blame them for being afraid of the housing market? Job creation has averaged less than 150,000 jobs per month over the last year, below the amount needed to absorb college and high school graduates entering the workforce.

That being said, the economy isn’t the only factor restraining the demand for housing. Over the years, credit standards and down payment requirements have been ratcheted up in recent years at the FHA and government-sponsored enterprises; however, banks at least have raised their standards even further in an attempt to limit potential lawsuits. A direct result of this is that FICO scores on Mortgages backed by Fannie Mae rose from an average of 719 in 2005 to a peak average of 756 in the second quarter of 2011. Likewise, FICO scores on Mortgages originated through the FHA averaged 632 in the second quarter of 2007 but reached 700 in the second quarter of 2011. Outside of the FHA, it is said that down payments greater than 20 percent are the norm. Although traditional credit standards are a good thing, the pendulum has swung too far in this direction. Punishing quality borrowers for the mistakes of the past is not good for the health of the markets or the economy today.