Interesting Times

By Calculated Risk, 6-22-11

CoreLogic® Reports Shadow Inventory Continues to Decline

CoreLogic ... reported today that the current residential shadow inventory as of April 2011 declined to 1.7 million units, representing a five months’ supply. This is down from 1.9 million units, also a five months’ supply, from a year ago. The decline was due to fewer new delinquencies and the high level of distressed sales, which helped reduce the number of outstanding distressed loans.

CoreLogic estimates current shadow inventory, also known as pending supply, by calculating the number of distressed properties not currently listed on multiple listing services (MLSs) that are seriously delinquent (90 days or more), in foreclosure and real estate owned (REO) by lenders.
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Of the 1.7 million current shadow inventory supply, 790,000 units are seriously delinquent (2.6 months’ supply), 440,000 are in some stage of foreclosure (1.4 months’ supply) and 440,000 are already in REO (1.4 months’ supply).
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In addition to the current shadow inventory, there are 2 million current negative equity loans that are more than 50 percent or $150,000 “upside down.” These current but underwater loans have increased risk of entering the shadow inventory if the owners’ ability to pay is impaired while significantly underwater.

Mark Fleming, chief economist for CoreLogic commented, “The shadow inventory has declined by nearly one-fifth since it peaked in early 2010, in large part due to a reduced flow of newly delinquent loans in recent months. However, it will probably take several years for the shadow inventory to be absorbed given the long timelines in processing and completing foreclosures.”