April Shadow Inventory Back to October 2008 Levels | Peter F. F. Hunt, HUNT Real Estate ERA | Real Estate Information Network Resource Center

Monday, June 18, 2012

A recent report reveals that the current residential shadow inventory as of April 2012 fell to 1.5 million units, representing a supply of four months. According to the report from analytics provider CoreLogic, this was a 14.8 percent drop from April 2011, when shadow inventory stood at 1.8 million units, or a six-months' supply, which is approximately the same level as the country was experiencing in October 2008. Currently, the flow of new seriously delinquent (90 days or more) loans into the shadow inventory has been approximately offset by the equal volume of distressed (short and real estate owned) sales.

CoreLogic estimates the current stock of properties in the shadow inventory, also known as pending supply, by calculating the number of distressed properties that are seriously delinquent, in foreclosure and held as real estate owned (REO) by mortgage servicers but not currently listed on multiple listing services (MLSs). Transition rates of "delinquency to foreclosure" and "foreclosure to REO" are used to identify the currently distressed non-listed properties most likely to become REO properties. Properties that are not yet delinquent but may become delinquent in the future are not included in the estimate of the current shadow inventory. Shadow inventory is typically not included in the official metrics of unsold inventory.

Data highlights include:

As of April 2012, shadow inventory fell to 1.5 million units, or four-months' supply and represented just over half of the 2.8 million properties currently seriously delinquent, in foreclosure or REO.

The four-months' 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 9.1-months' supply just a year ago.

Of the 1.5 million properties currently in the shadow inventory, 720,000 units are seriously delinquent (two-months' supply), 410,000 are in some stage of foreclosure 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 3-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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