Home Inventory Falls, Even Ones You Can’t See

June 22, 2011

The housing market in April experienced less new mortgage delinquencies and more sales of distressed properties, which led to a decline in the “shadow inventory.”

Also known as pending supply, the shadow inventory fell to 1.7 million homes in April, a drop from 1.9 million properties in April 2010, according to data from CoreLogic.

Both April 2010 and 2011 numbers equate to a five-month supply of homes throughout the country that are not yet listed for sale.

CoreLogic estimates the current shadow inventory by calculating the number of distressed properties that are not currently listed on multiple listing services but that are delinquent 90 days or more, in foreclosure or real estate owned (REO) by lenders.

The shadow inventory, which is not generally included in the official measurement of unsold inventory, hit its peak in January 2010 at 2 million properties or an 8.5-month supply.

In April 2011, it registered 18 percent lower than that peak.

Other data highlights from April:

*Of the 1.7 million current shadow inventory supply, 790,000 units are seriously delinquent, 440,000 are in some stage of foreclosure and 440,000 are already in REO.

*In addition to the current shadow inventory, there are also 2 million homeowners nationwide that are “upside down” by more than 50 percent or $150,000 on their loans. These are properties are risk of entering the shadow inventory if their homeowners become unable to pay their mortgages.

*The total shadow and visible inventory was 5.7 million units in April 2011, down from 6.2 million units a year ago.

“The shadow inventory has declined by nearly one-fifth since it peaked in early 2010, in large part due to a reduced flow of newly delinquent loans in recent months,” said Mark Fleming, chief economist for CoreLogic.

“However, it will probably take several years for the shadow inventory to be absorbed given the long timelines in processing and completing foreclosures.”

At least the housing market is moving in the right direction.

Categories: Economy, Mortgages

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Thank you for the article. As a mortgage consultant, I am seeing a pick up in new home buyer interest. It seems folks are starting to understand the inventory will reduce in time.

Brian Hayes

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