Shadow Inventory Shrinks Across Country

June 17, 2012

Home in the ShadowsThere is a sinister menace lurking in the background of today’s real estate market. Yes, we are talking about the shadow inventory of homes. So what exactly is shadow inventory?

According to Hawaiihousinnews.com, shadow inventory refers to the amount of unlisted bank-owned homes (REOs) that are not yet on the market as well as the homes in preforeclosure that are likely headed to a trustee sale and will become REOs themselves. These properties are lurking in the shadows because they are not currently on the local MLS listings for the public to see, however they must be sold sooner or later by the foreclosing mortgagee (lender).

Many lenders hold off releasing these properties to avoid bringing down home prices even further.

However, a bit of good news has emerged according to data by CoreLogic that shows shadow inventory declining 14. 8 percent in the last year to 1.5 million homes. This number represents a four-months’ supply and is the lowest level since October 2008.

“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.

The 1.5 million units break down as follows:

  • 720,000 units are seriously delinquent.
  • 410,000 units are in some stage of foreclosure.
  • 390,000 that are already bank owned.

CoreLogic said in its report that the value of the entire inventory is about $246 billion, down from $270 billion a year ago and also a three-year low. The slowing rate of new delinquencies and the increase in sales of distressed properties is cited as the main reason for the declining shadow inventory.

The largest decline in “serious delinquencies” occurred in Arizona, with a 37 percent drop.

About The Author

Read All Stories By Mitch Levinson

Mitch Levinson is the author of “Internet Marketing: The Key to Increased New Home Sales” published by BuilderBooks. He is an Internet marketing expert with expertise in search engine optimization, website development, email marketing, social media and CRM consulting services. He is known for creating effective programs that can be tracked through analytics to prove effectiveness and ROI. Mitch is founder and president of MLC New Home Marketing and MLC FlatFee Realty, as well as managing partner of mRELEVANCE, LLC, a Marketing, Communication, Interactive agency with offices in Chicago and Atlanta. He currently leads the Chicago team. A Multi-Million Dollar Sales Producer who earned an MBA in Computer Information Systems and eCommerce, he brings a unique perspective and experience to the field of real estate communications. Mitch combines the two interests in order to help home builders and developers gain a competitive advantage through the Internet and technology. When he isn’t behind a computer, he enjoys participating in sports and coaching his kids’ teams. Mitch resides in Arlington Heights, Ill., a northwest suburb of Chicago, with his family, which includes two rambunctious labs. Visit my Google+ profile.

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