CoreLogic (NYSE: CLGX), a Santa Ana-based provider of information, analytics and business services, reported today that the current residential shadow inventory as of January 2012 was 1.6 million units (6-months' supply), approximately the same level reported in October 2011.
On a year-over-year basis, shadow inventory was down from January 2011, when it stood at 1.8 million units, or 8-months' supply. Currently, the flow of new seriously delinquent (90 days or more) loans into the shadow inventory has been offset by the roughly equal flow of distressed sales (short and real estate owned).
"Almost half of the shadow inventory is not yet in the foreclosure process," Mark Fleming, chief economist for CoreLogic, said in a news release. "Shadow inventory also remains concentrated in states impacted by sharp price declines and states with long foreclosure timelines."
"The shadow inventory remains persistent even though many other metrics of the housing market show signs of improvements. 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," Anand Nallathambi, president and CEO for CoreLogic, said in the release.
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.
As of January 2012, shadow inventory remained at 1.6 million units, or 6-months' supply and represented half of the 3 million properties currently seriously delinquent, in foreclosure or REO.
Of the 1.6 million properties currently in the shadow inventory (Figures 1 and 2), 800,000 units are seriously delinquent (3.1-months' supply), 410,000 are in some stage of foreclosure (1.6-months' supply) and 400,000 are already in REO (1.6-months' supply).
Florida, California and Illinois account for more than a third of the shadow inventory. The top six states, which would also include New York, Texas and New Jersey, account for half of the shadow inventory.The shadow inventory is approximately four times higher than its low point (380,000 properties) at the peak of the housing bubble in mid-2006.
Despite 3 million distressed sales since January 2009, the period when home prices were declining at their fastest rate, the shadow inventory in January 2012 is at the same level as January 2009.
The shadow inventory is approximately half of the size of all visible inventory listings. For every two homes available for sale, there is one home in the "shadows" (Figure 3).
The segment of borrowers that were 60+ days delinquent in the past but were "cured" and are now current on their payments is increasing. This figure was 7.2 percent in January 2012 (Figure 4), up from 5.7percent a year ago.
The total percent of borrowers who were ever 60+ days delinquent (irrespective of delinquency status today) increased to 15.5 percent in January 2012, up from 14.3 percent a year ago.
The highest concentration of shadow inventory is for loans with loan balances between $100,000 and $125,000 (Figure 5). More importantly while the overall supply of homes in the shadow inventory is declining versus a year ago, the declines are being driven by higher balance loans. For loans with balances of $75,000 or less, however, the shadow is still growing and is up 3 percent from a year ago.