Shadow Inventory Falls to 1.8 Million Units

March 30, 2011 No Comments »


The shadow inventory, which represents the pending supply of housing in the United States, fell to 1.8 million units as of January 2011, according to a new report from CoreLogic.

It slipped from 2.0 million units a year ago, but still represents nine months of supply, thanks to a slower sales rate.

Of the 1.8 million units, 870,000 are seriously delinquent (4.2 months’ supply), 445,000 are in some stage of foreclosure (2.1 months’ supply) and 470,000 are already owned by banks and mortgage lenders (2.2 months’ supply).

All of these properties are not currently listed on the multiple listing service (MLS), but are expected to become bank-owned properties (REO).

New Jersey, Illinois and Maryland have the highest level of distressed months’ supply thanks to higher than average 90+ day delinquencies and lower sales activity.

Conversely, North Dakota, Alaska and Wyoming have the lowest distressed months’ supply, as these states didn’t experience a boom/bust in housing.

CoreLogic does not include properties that are not yet delinquent, but may become delinquent in the future in its shadow inventory figures.

For example, there are nearly two million current negative equity mortgages that are more than 50 percent “upside down” (150% loan-to-value) that will likely add to the shadow supply in the near future.

The company noted that loan modifications and short sales have the potential to reduce shadow supply by 50 percent, but low borrower response rates to lender outreach and high re-default rates on loan mods would severely dent such an impact.

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