Shadow Inventory Continues Rapid Decline, Down 28% from Peak
The so-called shadow inventory continues to shrink and is now down 28 percent from its high point in January 2010. According to the January 2013 shadow inventory report from CoreLogic there are now 2.2 million homes in the inventory which it calculates as properties that are seriously delinquent, in some stage of foreclosure, or lender owned real estate (REO) that is not included on a multiple listing service.
The January number is 18 percent lower it was in January 2012 and represents a supply of nine months at the rate the inventory is being resolved. Transition rates of “delinquency to foreclosure” and “foreclosure to REO” are used to identify the currently distressed unlisted properties most likely to become REO. The number includes 85 percent of the 2.6 million properties currently seriously delinquent, in foreclosure or REO. Properties which are not currently delinquent but likely to become so are not included in the figures.
“The shadow inventory continued to drop at double the rate in January from prior-year levels. At this point in the recovery, we are seeing healthy reductions across much of the nation,” said Anand Nallathambi, president and CEO of CoreLogic. “As we move forward in 2013, we need to see more progress in Florida, New York, California, Illinois and New Jersey which now account for almost half of the country’s remaining shadow inventory.”
“The shadow inventory is declining steadily as properties are moving through the distressed pipeline,” said Dr. Mark Fleming, chief economist for CoreLogic. “States like Arizona, California and Colorado are experiencing significant declines year over year in the stock of serious delinquencies, a positive sign for further improvement in the shadow inventory.”
Of the 2.2 million units, 1 million are seriously delinquent, a 4.1 month’s supply; 798,000 are in some state of foreclosure (3.2 months) and 342,000 have already been foreclosed (1.4 months supply.)
The value of shadow inventory was $350 billion as of January 2013, down from $402 billion a year ago and down from $381 billion six months ago.
The greatest annual improvements in delinquencies, the main driver of the shadow inventory, occurred in Arizona (-40 percent) and California (-33 percent). Colorado, Michigan, and Wyoming all saw delinquencies decrease by at least 23 percent. As of January 44 percent of all distressed properties in the country were located in five states, Florida, California, New York, Illinois and New Jersey with Florida alone carrying 16 percent.