Shadow Inventory Haunts Backlogged States | Waccabuc NY Real Estate

The shadow inventory of foreclosures fell in July and the flow of new seriously delinquent loans into the shadow inventory has been roughly offset by the equal volume of sales, but large numbers of potential foreclosures still linger in five states where processing timelines are much longer than the national median.

CoreLogic reported today that the current residential shadow inventory as of July 2012 fell to 2.3 million units, representing a supply of six months. This was a 10.2 percent drop from July 2011, when shadow inventory stood at 2.6 million units, which is approximately the same level the country was experiencing in March 2009.

“Broadly speaking, the shadow inventory continued to shrink in July,” said Anand Nallathambi, president and CEO of CoreLogic. “The reduction is being driven by a variety of resolution approaches. This is yet another hopeful sign that the housing market is slowly healing.”

“The decline in shadow inventory has recently moderated reflecting the lower outflow of distressed sales over the past year,” said Mark Fleming, chief economist for CoreLogic. “While a lower outflow of distressed sales helps alleviate downward home price pressure, long foreclosure timelines in some parts of the country causes these pools of shadow inventory to remain in limbo for an extended period of time.”

Data highlights as of July 2012:

• As of July 2012, shadow inventory fell to 2.3 million units or six-months’ supply and represented just over three-fourths of the 2.7 million properties currently seriously delinquent, in foreclosure or in REO.
• Of the 2.3 million properties currently in the shadow inventory (Figures 1 and 2), 1 million units are seriously delinquent (2.9 months’ supply), 900,000 are in some stage of foreclosure (2.5-months’ supply) and 345,000 are already in REO (1.0-months’ supply).
• The dollar volume of shadow inventory was $382 billion as of July 2012, down from $397 billion a year ago and $385 billion last month.
• Serious delinquencies, which are the main driver of the shadow inventory, declined the most from April 2012 to July 2012 in Arizona (3.2 percent), Pennsylvania (2.8 percent), New Jersey (2.3 percent), Delaware (2.2 percent) and Maine (2.2 percent).
• As of July 2012, Florida, California, Illinois, New York and New Jersey make up 45 percent of all distressed properties in the country.

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