n a sign the nation’s housing foreclosure crisis could be easing, the number of distressed dwellings that make up a “shadow inventory” has decreased across the country to fall 2008 levels, reports CoreLogic, a California-based real estate research firm.
Short sales and sales of bank-owned houses are driving down the inventory, CoreLogic says, and notes the reduction of the shadow inventory should help slow declines in housing prices..
CoreLogic reported Thursday that the current residential shadow inventory as of April 2012 fell to 1.5 million units, representing a supply of four months. This was a 14.8 percent drop from April 2011, when shadow inventory stood at 1.8 million units, or a six-months’ supply, which is about the same level as the country was experiencing in October 2008.
The research firm says the volume of distressed (short and real estate owned) sales has largely offset the flow of new seriously delinquent (90 days or more) loans into the shadow inventory.
CoreLogic estimates the current stock of properties in the shadow inventory, also known as pending supply, by calculating the number of distressed properties that are seriously delinquent, in foreclosure and held as real estate owned (REO) by mortgage servicers but not currently listed on multiple listing services (MLSs). Transition rates of “delinquency to foreclosure” and “foreclosure to REO” are used to identify the currently distressed non-listed properties most likely to become REO properties.
Properties that are not yet delinquent but may become delinquent in the future are not included in the estimate of the current shadow inventory. Shadow inventory is typically not included in the official metrics of unsold inventory.
“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.”
Here are highlights of CoreLogic’s findings on the shadow inventory:
>>>As of April 2012, shadow inventory fell to 1.5 million units, or four-month supply and represented just over half of the 2.8 million properties currently seriously delinquent, in foreclosure or REO.
>>>The four-month supply of shadow inventory is at its lowest level in nearly three years. It parallels the unsold months’ supply of non-distressed active listings that hit a more than five-year low in April, falling to a 6.5-months’ from a 9.1-months’ supply just a year ago.
>>>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 dollar volume of shadow inventory was $246 billion as of April 2012, down from $270 billion a year ago and a three-year low.
>>>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), Michigan (-23.7 percent) and Minnesota (-18.1 percent).