Shadow Inventory Slides to 2009 Levels

By Mike Colpitts

The inventory of homes not yet foreclosed but regarded as unsellable as they are held back from the market known as the shadow inventory homes for sale has dropped to January 2009 levels, according to real estate data firm CoreLogic.

California, Florida and Illinois, where foreclosures are at some of the highest levels in the U.S. account for more than a third of the shadow inventory. New York, Texas and New Jersey make up another half of the inventory, which shows that more than about 80% of the troubled shadow inventory of homes is in six states.

The delinquency rate for single family homes rose to 3.57% during November, up from 3.54% the previous month, Freddie Mac said. The inventory of homes remaining in the shadows, which are not yet accounted for by lenders as formally foreclosed but hinder the markets recovery hovers at 1.6 million units.

The supply of homes demonstrates a lower shadow inventory than were accounted for in October 2010 when the inventory stood at 1.9 million homes, according to CoreLogic.

The company estimates the current stock of homes in the shadow inventory by calculating the number of distressed properties not currently listed by multiple listing services (MLSs) in the U.S., homes that are seriously delinquent on mortgages, properties in the foreclosure pipeline or currently under bank assisted short sales.

foreclosure

The 1.6 million properties represent about a five month inventory of homes to be sold, about half of the 3-million presently delinquent more than 90 days, in foreclosure or bank owned (REOs). Some 777,000 estimated properties are seriously delinquent, 430,000 in the foreclosure process and 370,000 have already been formally repossessed.

The inventory of homes in the shadows are about four times higher than at its low point at the peak of the housing bubble in mid-2006, which was about 380,000 properties. The foreclosure crisis is expected to increase the volume of troubled homes in 2012, according to most housing analysts.

“The shadow inventory overhang is a large impediment to the improvement in the housing market because it puts downward pressure on home prices, which hurts home sales and building activity while encouraging strategic defaults,” said CoreLogic chief economist Mark Fleming.

There have been about 3-million distressed sales since January 2009, which includes bank assisted short sales and foreclosures. But the massive number has had little impact on the troubled housing market as home prices decline in the majority of the country.