CoreLogic says Shadow Inventory "Persistent"

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A report released this morning by
CoreLogic shows that the shadow inventory, composed of homes that are either in
bank owned real estate (REO), in the foreclosure process, or seriously
delinquent, continues to be, as CoreLogic’s CEO Anand Nallathambi said, “persistent.”  The residential shadow inventory as of
January was virtually unchanged from the last CoreLogic report based on October
data, at 1.6 million units, a six month supply at the current sales rate.

CoreLogic estimates the current
stock of properties in the 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, in foreclosure
and real estate owned (REO) by lenders. 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.

On a year-over-year basis the inventory
was down from 1.8 million units or an 8-months’ supply in January of last
year.  At present the flow of new
seriously delinquent (90+ days) mortgages into the shadow inventory is being
offset by the roughly equal liquidation of properties through REO and
pre-foreclosure sales.

Based on current estimates of the
visible inventory (both distressed and non-distressed), the 1.6 million units
in the shadow inventory represent half of the 3 million properties that are
currently seriously delinquent, in foreclosure, or in REO. For every two homes
available for sale, there is one home in the “shadows.”  The shadow inventory includes 800,000 units
that are seriously delinquent (3.1-months’ supply), 410,000 that are in some
stage of foreclosure (1.6-months’ supply) and 400,000 are already in REO
(1.6-months’ supply).

Almost half of the shadow
inventory is not yet in the foreclosure process
,” said Mark Fleming, chief
economist for CoreLogic. “Shadow inventory also remains concentrated in
states impacted by sharp price declines and states with long foreclosure
timelines.”  Florida, California,
and Illinois together account for more than one third of the shadow
inventory.  Those states along with New
York, Texas, and New Jersey account for one half.

“The shadow inventory remains
persistent even though many other metrics of the housing market show signs of
improvements.,” Nallathambi said.  “In
some hard-hit markets the demand for REO and distressed property is now
outstripping supply. As we move into what is traditionally the peak selling
season for real estate, servicers will certainly be watching closely to see if
now is the time to move more inventory out of the shadows.

Even through there have been over 3
million distressed home sales since January 2009, the shadow inventory in
January was at the same level as in January 2009, the period when home prices
were falling the fastest.

Loans with outstanding balances
between $100,000 and $125,000 represent the highest concentration in the shadow
inventory and the decline in the overall supply of homes versus one year ago is
being driven by a decline in higher balance loans while the supply of loans with
balances under $75,000 is up three percent from January 2011

Of all mortgaged homeowners in the
country, 15.5 percent have been over 60 days delinquent at some point in the
past, up from 14.3 percent one year ago. 
The percentage of borrowers who are current on their mortgages but have
been 60 or more days delinquent at some point was 7.2 percent in January
compared to 5.7 percent one year earlier. 

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