Shadow Inventory Still Waning

Sustained improvement in the housing market – including higher prices, lower inventories and growth in new and existing home sales – is allowing lenders to bring more of their shadow inventory to market, reducing the backlog of foreclosed homes and aiding the health of the housing recovery.

The housing market's "shadow inventory" of properties that are seriously delinquent, in some stage of foreclosure, or lender owned real estate (REO) continues to shrink.

According to a January 2013 report from CoreLogic, 2.2 million homes now qualify for the shadow inventory, 28 percent less than the high point in January 2010. The January number is 18 percent lower it was in January 2012, and represents a supply of nine months at the rate the inventory is being resolved.

"The shadow inventory is declining steadily as properties are moving through the distressed pipeline," said Dr. Mark Fleming, chief economist for CoreLogic. "States like Arizona, California and Colorado are experiencing significant declines year over year in the stock of serious delinquencies, a positive sign for further improvement in the shadow inventory."

Of the 2.2 million units, 1 million are seriously delinquent, a 4.1 month's supply; 798,000 are in some state of foreclosure (3.2 months) and 342,000 have already been foreclosed (1.4 months supply.)

"The shadow inventory continued to drop at double the rate in January from prior-year levels. At this point in the recovery, we are seeing healthy reductions across much of the nation," said Anand Nallathambi, president and CEO of CoreLogic. "As we move forward in 2013, we need to see more progress in Florida, New York, California, Illinois and New Jersey, which now account for almost half of the country's remaining shadow inventory."