Wednesday, December 21, 2011

CoreLogic: Existing Home Shadow Inventory remains at 1.6 million units

by Bill McBride on 12/21/2011 08:20:00 AM

From CoreLogic: CoreLogic® Reports Shadow Inventory as of October 2011 Still at January 2009 Levels

CoreLogic ... reported today that the current residential shadow inventory as of October 2011 remained at 1.6 million units, representing a supply of 5 months. This was down from October 2010, when shadow inventory stood at 1.9 million units, or 7-months’ supply, but approximately the same level as reported in July 2011. Currently, the flow of new seriously delinquent loans into the shadow inventory has been offset by the roughly equal flow of distressed (short and real estate owned) sales.

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 (90 days or more), in foreclosure and real estate owned (REO) by lenders.
...
Of the 1.6 million properties currently in the shadow inventory, 770,000 units are seriously delinquent (2.5-months’ supply), 430,000 are in some stage of foreclosure (1.4-months’ supply) and 370,000 are already in REO (1.2-months’ supply).
...
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.
...
“The shadow inventory overhang is a large impediment to the improvement in the housing market because it puts downward pressure on home prices, which hurts home sales and building activity while encouraging strategic defaults,” said Mark Fleming, chief economist for CoreLogic.
CoreLogic Shadow Inventory Click on graph for larger image.

This graph from CoreLogic shows the breakdown of "shadow inventory" by category. For this report, CoreLogic estimates the number of 90+ day delinquencies, foreclosures and REOs not currently listed for sale. Obviously if a house is listed for sale, it is already included in the "visible supply" and cannot be counted as shadow inventory.

So the key number in this report is that as of October, there were 1.6 million homes seriously delinquent, in the foreclosure process or REO that are not currently listed for sale.

Note: The unlisted REO still seems a little high since total REO has dropped sharply over the last couple of quarters.