Shadow Inventory of Homes Continues to Slide

In July of this year, the shadow inventory of U.S. homes declined by 10.2% to 2.3 million units, from 2.6 million units in July 2011. Shadow inventory refers to the number of properties that are seriously delinquent, in foreclosure, and held as real estate owned (REO) by mortgage servicers but not currently listed on multiple listing services.

As part of its report on shadow inventory, CoreLogic (NYSE: CLGX) notes:

Currently, the flow of new seriously delinquent (90 days or more) loans into the shadow inventory has been roughly offset by the equal volume of distressed (short and real estate owned) sales.

CoreLogic pointed out some highlights:

• Of the 2.3 million units currently included in the shadow inventory, 1 million units are seriously delinquent, 900,000 are in some stage of foreclosure, and 345,000 are already REO properties.
• The dollar value of the shadow inventory fell from $397 billion in July 2011 to $382 billion in July 2012 and rose to $385 billion in September.

The key point about the CoreLogic report is that the shadow inventory is declining, which will eventually lead to higher home prices. The rising value of the shadow inventory between July and September of this year is also a sign that the housing market continues its recovery.

Paul Ausick