Shadow Inventory Continues to Decline; Good news for the housing market

Dennis Norman St Louis

A report released this morning by CoreLogic shows that the current residential “shadow” inventory as of July 2011 declined slightly from 1.7 million units in April to 1.6 million units, and was down from 1.9 million units a year ago. This current shadow inventory represents a 5 month supply. CoreLogic includes in it’s shadow inventory numbers properties that are either 90+ days delinquent on mortgages, in some stage of foreclosure, or an REO but not presently for sale in an MLS.

Shadow Inventory Report Highlights:

  • The shadow inventory of residential properties as of July 2011 fell to 1.6 million units, or 5–months’ worth of supply, down from 1.9 million units, or a 6-months’ supply, as compared to July 2010.
  • Of the 1.6 million properties currently in the shadow inventory, 770,000 units are seriously delinquent (2.2-months’ supply), 430,000 are in some stage of foreclosure (1.2-months’ supply) and 390,000 are already in REO (1.1-months’ supply).
  • As of July 2011 the shadow inventory is 22 percent lower than the peak in January 2010 at 2 million units, 8.4-months’ supply.
  • The total shadow and visible inventory was 5.4 million units in July 2011, down from 6.1 million units a year ago. The shadow inventory accounts for 29 percent of the combined shadow and visible inventories.
  • The aggregate current mortgage debt outstanding of the shadow inventory was $336 billion in July 2011, down 18 percent from $411 billion a year ago.

Mark Fleming, chief economist for CoreLogic, commented, “The steady improvement in the shadow inventory is a positive development for the housing market. However, continued price declines, high levels of negative equity and a sluggish labor market will keep the shadow supply elevated for an extended period of time.”


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