Shadow Inventory Slightly Lowers

By: Esther Cho, DSNews.com

As of October 2012, 2.3 million housing units still remain in shadow inventory, CoreLogic reported Wednesday.

The total translates into a supply of 7 months and sits 12.3 percent lower than the 2.6 million units in October 2011, according to the data provider. From September 2012, shadow inventory shrunk by about 1 percent.

In dollar terms, shadow inventory stood at $376 billion, down from $399 billion in October 2011.

“The size of the shadow inventory continues to shrink from peak levels in terms of numbers of units and the dollars they represent,” said Anand Nallathambi, president and CEO of CoreLogic. “We expect a gradual and progressive contraction in the shadow inventory in 2013 as investors continue to snap up foreclosed and REO properties and the broader recovery in housing market fundamentals takes hold.”

To determine the number of residential units in shadow inventory, CoreLogic calculated the number of properties that are seriously delinquent, in foreclosure, and held as REOs but not currently listed on multiple listing services.

Seriously delinquent properties were the main contributors to shadow inventory and numbered 1.04 million units (3.3 months’ supply) out of 2.3 million. About 903,000 properties in some stage of foreclosure were in the shadows, representing a supply of 2.8 months, while REOs in shadow inventory totaled 354,000, which is a 1.1 months’ supply.

“Almost half of the properties in the shadow are delinquent and not yet foreclosed,” noted Mark Fleming, chief economist for CoreLogic. “Given the long foreclosure timelines in many states, the current shadow inventory stock represents little immediate threat to a significant swing in housing market supply.”

During a three-month period ending in October 2012, Arizona saw a 13.3 percent decrease in serious delinquencies, the most out of any other state. California ranked second with its 9.7 percent decline and was followed by Michigan (6.8 percent), Colorado (6.8 percent), and Wyoming (5.9 percent).

Overall, shadow inventory represented 85 percent of the 2.7 million properties that are seriously delinquent, in foreclosure or in REO, according to CoreLogic. And, five states alone accounted for 45 percent of the 2.7 million properties. The states were Florida, California, Illinois, New York and New Jersey.