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Thursday, December 17, 2009

Report on Housing: 'Shadow Inventory’ Increases Sharply

by Calculated Risk on 12/17/2009 06:48:00 PM

From Bloomberg: ‘Shadow Inventory’ of U.S. Homes Climbs, Report Says

The number of homes that may be in the pipeline for a sale because of foreclosure and delinquency climbed about 55 percent to 1.7 million at the end of September, according to estimates by First American CoreLogic.
“While the visible month’s supply has decreased and is beginning to approach more normal levels, adding in the pending supply reveals there is still quite a bit of inventory that will impact the housing market for the next few years,” First American said.
A few points:

  • First American CoreLogic is counting the number of homes seriously delinquent or in the foreclosure process.

  • The 55% increase is from last year (1.1 million to 1.7 million in this category)

  • The comment at the end about "beginning to approach more normal levels" is about months-of-supply, not total inventory. Obviously months-of-supply is impacted by the surge in sales due to the expected expiration of the homebuyer tax credit.

  • The term "shadow inventory" is used in different ways. I consider all of the following to be "shadow inventory":
  • REOs. There are bank owned properties that have not been put on the market yet.

  • Foreclosures in process and seriously delinquent loans (although some of these may be in the modification process).

  • New high rise condos. These properties are not included in the new home inventory report from the Census Bureau, and do not show up anywhere unless they are listed.

  • Homeowners waiting for a better market. These are homeowners waiting for better market conditions to sell.
  • On high rise, condos from the WSJ (ht William):
    In the downtown Miami and neighboring Brickell areas, more than 22,000 condos have been built in the past four years, or more than twice the number added over the previous four decades, says Holliday Fenoglio Fowler LP, which advises real-estate developers and investors.