‘Shadow inventory’ of homes beginning to slow

The current residential shadow inventory as of April declined to 1.7 million units, representing a five months’ supply. This is down from 1.9 million units, according to CoreLogic, a provider of information, analytics and business services.

The decline was due to fewer new delinquencies and the high level of distressed sales, which helped reduce the number of outstanding distressed loans.

“The shadow inventory has declined by nearly one-fifth since it peaked in early 2010, in large part due to a reduced flow of newly delinquent loans in recent months,” said Mark Fleming, chief economist for CoreLogic. “However, it will probably take several years for the shadow inventory to be absorbed given the long timelines in processing and completing foreclosures.”

CoreLogic estimates current shadow inventory, also known as pending supply, by calculating the number of distressed properties not currently listed on multiple listing services (MLSs) that are seriously delinquent (90 days or more), in foreclosure and real estate owned (REO) by lenders.
Of the 1.7 million current shadow inventory supply, 790,000 units are seriously delinquent (2.6 months’ supply), 440,000 are in some stage of foreclosure (1.4 months’ supply) and 440,000 are already in REO (1.4 months’ supply).