Shadow inventory levels down
According to CoreLogic, the residential shadow inventory fell 14.8 percent between April 2011 and April 2012, hitting 1.5 million units, representing a four month supply, down from last year’s 1.8 million units, or a six months’ supply, approximately the same level as October 2008. The 1.5 million units represents 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
Currently, the flow of new seriously delinquent (90 days or more) loans into the shadow inventory has been approximately offset by the equal volume of distressed (short and real estate owned) sales.
“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 Dr. 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.”
Delinquencies fall dramatically in Arizona, California
Additionally, 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 serious delinquencies 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).
CoreLogic estimates the current stock of properties in the shadow inventory, 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.