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Shadow Inventory Not Going Anywhere

No matter how one looks at the current residential shadow inventory data it does not indicate improvements, even though the overall numbers remained flat at 1.6 million units as of January 2012, according to CoreLogic.

Findings show that despite a total of 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 it was in January 2009.

Moreover, it is “approximately four times higher” than its low point of about 380,000 properties it reached at the peak of the housing bubble in mid-2006.

According to CoreLogic’s chief economist Mark Fleming, the shadow inventory persists at almost flat levels regardless of signs of improvement in many other housing market metrics.

The shadow inventory, or the number of homes not yet in the foreclosure process, “is approximately half of the size of all visible inventory listings” as for every two homes available for sale, there is one home in the “shadows.”

The best news appears to be the fact that the shadow inventory is almost at the same level as it was in October 2011, or equal to a six-month supply, that represents half of the 3 million properties currently seriously delinquent, in foreclosure or REO.

Another finding: 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.

Currently the highest concentration of shadow inventory is for loans with loan balances between $100,000 and $125,000. But that may change, too, since the number of loans with balances of $75,000 or less, that are part of the shadow inventory, increased 3% compared to a year ago.

As expected, most of the inventory is concentrated in states with long foreclosure timelines and those more severely impacted by price declines such as Florida, California and Illinois, which account for over one-third of the total, followed by New York, Texas and New Jersey.

Short sales and foreclosure sales helped offset some of the flow into the shadow inventory of new loans that are 90 days or more delinquent, or seriously delinquent.

Year-over-year the shadow inventory decreased from 1.8 million units in January 2011 to 1.6 million this January, “offset by the roughly equal flow of distressed sales” seen in some hard-hit markets were the demand for REO and distressed property is now outstripping supply, according to Anand Nallathambi, president and CEO for CoreLogic.

Of the 1.6 million properties currently in the shadow inventory 800,000 units are seriously delinquent, 410,000 are in some stage of foreclosure and 400,000 are already in REO.

Year-over-year the total percent of borrowers who were 60 days or more delinquent—irrespective of delinquency status today—increased to 15.5% in January 2012, up from 14.3%. Also borrowers who passed the 60-day delinquency mark in the past but were “cured” and are now current on their payments increased to 7.2% in January 2012 up from 5.7% a year ago.