Home/Mortgages/Shadow Inventory Gets a Little Smaller

June 23, 2011 (Chris Moore)

The current residential shadow inventory declined to 1.7 millions units in April 2011 from 1.9 million units reported in April 2010 according to real estate information provider CoreLogic. The decline was attributed to fewer new delinquencies and a higher level of distressed property sales.

CoreLogic estimates the total shadow inventory and visible inventory to be 5.8 million units in April 2011. That amount is down from an estimated 6.2 million units in April 2010. Shadow inventory are properties that are in some stage of foreclosure but are not yet listed for sale.

Although CoreLogic’s estimates of foreclosure inventories are less than those released yesterday by Lender Processing Service (LPS), data from both real estate information providers shows a downward trend in foreclosure inventories.

The current shadow inventory consists of 790,000 units that are seriously delinquent, 90 days of more behind in payments, 440,000 units that are in some stage of foreclosure and 440,000 units that are already in REO.

CoreLogic estimates that the shadow inventory peaked at 2 million units in January 2010.

Mark Fleming, chief economist for CoreLogic, stated, “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.”

The report also notes that an estimated 2 million units currently have underwater loans which are at increased risk of entering the shadow inventory if the owners’ ability to pay is impaired.

Tags: CoreLogic, shadow inventory, delinquencies, distress property, visible inventory, REO, underwater loans