The current residential shadow inventory as of July 2011 dropped slightly to 1.6 million units, which represents a five-month supply, according to a CoreLogic report released today.
This is down from 1.9 million units — representing a supply of six months — compared to a year ago, and follows a dip from April 2011 when shadow inventory stood at 1.7 million units.
The slight drop in shadow inventory is being driven by a pace of new delinquencies that is slower than the disposition pace of distressed assets.
CoreLogic projected that the current stock of properties in the shadow inventory, which is also known as pending supply, by calculating the number of distressed properties that are not currently listed on multiple listing services (MLSs) that are seriously delinquent (90 days or more), in foreclosure and real estate owned by lenders, CoreLogic stated.
Transition rates of “delinquency to foreclosure” and “foreclosure to REO” are utilized to find out the now-distressed, non-listed properties that are most likely to become REO properties.
Properties that are not yet delinquent but might become delinquent in the future are not included in CoreLogic's estimate of the current shadow inventory. Shadow inventory is usually not included in the official metrics of unsold inventory, the firm said.
The shadow inventory of residential properties as of July 2011 dipped to 1.6 million units, or five–months’ worth of supply, down from 1.9 million units, or a six-months’ supply, versus July 2010, the firm said.
Of the 1.6 million properties currently in shadow inventory, 770,000 units are seriously delinquent (2.2-months’ supply), 430,000 are in some stage of foreclosure (1.2-months’ supply) and 390,000 are already in REO (1.1-months’ supply).
As of July 2011, the shadow inventory is 22% less versus the peak in January 2010 at 2 million units, 8.4-months’ supply. The total shadow and visible inventory was 5.4 million units in July 2011, which is less than 6.1 million units a year ago, CoreLogic reported.
The shadow inventory comprises 29% of the combined shadow and visible inventories. The aggregate current mortgage debt outstanding of the shadow inventory was $336 billion in July 2011, which went down 18% from $411 billion a year ago.
“The steady improvement in the shadow inventory is a positive development for the housing market," said Mark Fleming, CoreLogic chief economist. "However, continued price declines, high levels of negative equity and a sluggish labor market will keep the shadow supply elevated for an extended period of time.”
