Shadow Inventory Drops to 4-month Supply

appear to be getting a grip on the nation’s foreclosure inventory according to a
report released Thursday by CoreLogic. 
The foreclosure or “shadow” inventory represents the number of
properties that are seriously delinquent, in foreclosure or owned by mortgage
servicers and lenders (REO) but not currently listed for sale on a multiple
listing service.   

inventory fell to 1.5 million units in April, a four month supply at the
current rate of attrition.  This is approximately
the same level that existed in October 2008 and a decrease of 14.8 percent from
April 2011 when there were 1.8 million units in inventory or a six-month
supply.  Shadow
inventory is typically not included in the official metrics of unsold inventory
and the current figure represents just over half of the 2.8 million properties
currently seriously delinquent, in foreclosure or REO. 

The dollar volume of shadow
inventory was $246 billion as of April 2012, down from $270 billion a year ago
and a three-year low.

The flow
of new loans that are seriously delinquent
, that is 90 days or more, into the
shadow inventory has now been approximately offset by the equal volume of
distressed property sales including both sales of REO and pre-foreclosure or
short sales.

Of the 1.5 million properties currently
in the shadow inventory, 720,000 units are seriously delinquent (two months’
supply), 410,000 are in some stage of foreclosure (1.1-months’ supply) and
390,000 are already in REO (1.1-months’ supply).  The foreclosure inventory does not include
loans that are not yet seriously delinquent but may become so. 

“Since peaking at 2.1 million
units in January 2010, the shadow inventory has fallen by 28 percent. The
decline in the shadow inventory is a positive development because it removes
some of the downward pressure on house prices,” said Mark Fleming, chief
economist for CoreLogic. “This is one of the reasons why some markets that
were formerly identified as deeply distressed, like Arizona, California and
Nevada, are now experiencing price increases.”

Serious delinquencies, which are the
main driver of the shadow inventory, declined the most in Arizona (-37.0
percent), California (-28.0 percent), Nevada (-27.4 percent), and Michigan
(-23.7 percent.)

…(read more)

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