Shadow inventory falls back to 2008 levels

By Dennis Norman, on June 15th, 2012

Yesterday, CoreLogic released their shadow inventory report which showed that the current residential shadow inventory (as of April 2012) had fallen to 1.5 million units, representing a supply of four months which is a 14.8 percent decline from a year ago when shadow inventory stood at 1.8 million units, or a six-months’ supply. The April 2012 level is roughly equal to the level we saw back in October 2008, which is good news!

Shadow inventory basically represents the foreclosures “lurking in the shadows” or more accurately put, the number of home loans that are seriously delinquent, in foreclosure or already foreclosed on and owned by banks or lenders but not currently listed for sale on the market.

Shadow inventory for the U.S. hit it’s peak of 2.1 million units in January, 2010 and since 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 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.”

Report Highlights:

As of April 2012, shadow inventory fell to 1.5 million units, or four-month supply and represented 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. It parallels 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 (Figures 1 and 2), 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 a three-year low.
Serious delinquencies, which are the main driver of the shadow inventory, 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).

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