The current rate at which mortgage borrowers are falling into serious delinquency closely matches the rate of distressed sales – short sales and REO sales- according to CoreLogic’s latest report released Wednesday.
While distressed sales are keeping the shadow inventory from growing, the quantity on record is not yet decreasing. In fact, today’s shadow inventory mirrors that recorded in January 2009, though there have been 3 million distressed sales since that date.
The total 1.6 million properties CoreLogic considers to be part of the shadow inventory makes for a six-month supply of homes for the market.
The total is lower than the 1.8 million CoreLogic counted in January 2011.
However, CoreLogic estimates the current shadow inventory is about half the current visible inventory.
Furthermore, “Almost half of the shadow inventory is not yet in the foreclosure process,” said Mark Fleming, chief economist for CoreLogic.
The total shadow inventory includes 400,000 REOs, 410,000 properties already in foreclosure, and 800,000 seriously delinquent loans.
A few hard-hit states are home to a disproportionate percentage of the industry’s shadow inventory. More than one-third of the shadow inventory is in California, Florida, and Illinois. Add to this the shadows lurking in New York, Texas, and New Jersey, and you have half of the total shadow inventory plaguing the market.
However, “In some hard-hit markets the demand for REO and distressed property is now outstripping supply, said Anand Nallathambi, CoreLogic’s president and CEO. “As we move into what is traditionally the peak selling season for real estate, servicers will certainly be watching closely to see if now is the time to move more inventory out of the shadows.”
CoreLogic reported that loans between $100,000 and $125,000 make up the highest concentration of the shadow inventory, but loans less than $75,000 are starting to make up an increasing portion of the shadow. In fact the amount of loans in this category that have dimmed into the shadows increased 3 percent from last year.