CoreLogic: Shadow Inventory Jumps More Than 10% in One Year
By: Carrie Bay
The industry’s ominous shadow inventory of REOs that have yet to hit the market and soon-to-be-REOs increased by more than 10 percent between August 2009 and August 2010, according to new figures released by CoreLogic Monday.
CoreLogic defines shadow inventory as the number of properties that are seriously delinquent (90 days or more), in foreclosure, and bank-owned that are not currently listed for sale on multiple listing services (MLSs).
Based on the company’s calculations, the shadow supply of residential properties reached 2.1 million units in August of this year – a volume that will take eight months to clear at today’s sluggish pace of home sales. That’s up from CoreLogic’s estimates a year ago of 1.9 million units, or a five-months’ supply when sales activity was stronger.
Mark Fleming, chief economist for CoreLogic, said, “The weak demand for housing is significantly increasing the risk of further price declines in the housing market. This is being exacerbated by a significant and growing shadow
inventory that is likely to persist for some time due to the highly extended time-to-liquidation that servicers are currently experiencing.”
CoreLogic says the visible inventory of properties for sale totaled 4.2 million homes at the end of August, essentially the same as in August 2009. The visible inventory measures the unsold stock of new and existing homes that were on the market. CoreLogic says the visible months’ supply increased to 15 months in August, up from 11 months a year earlier due to the decline in sales during the last few months.
Add to that the 2.1 million homes hidden in the shadows, and CoreLogic says the total months’ supply of unsold homes was 23 months in August. Typically a reading of six to seven months is considered normal, so the current total months’ supply is roughly three times the normal rate.
In its analysis, CoreLogic also found that the highest levels of distressed months’ supply – which is calculated as the ratio of the number of properties that are 90-plus days delinquent to the number of sales – are in Florida, Michigan, and California.
Although Phoenix and Las Vegas have high months’ supply of total housing inventory, they are not among the markets with the highest distressed months’ supply because of the increased number of distressed sales that have been occurring in those markets, CoreLogic explained.
The markets with the lowest distressed supply are all in Texas, which CoreLogic says largely bypassed the housing boom and subsequent bust.
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