From USA Today:
The U.S. had 1.8 million distressed homes in January that had yet to be listed for sale, a “shadow inventory” that is expected to weigh on home prices for years.
Market researcher CoreLogic said Wednesday that the shadow inventory had shrunk slightly the past year, from 2 million homes in January 2010.
The dip was driven by an improving economy, which helped more people stay current on their mortgages, strengthening in some home prices last year and more loan modifications, says Sam Khater, CoreLogic senior economist.
Khater expects the numbers to keep falling with an improving economy. But risks remain, including renewed declines in U.S. home prices and any hit to the national economic recovery.
As defined by CoreLogic, the shadow inventory includes homes that are more than 90 days delinquent on the mortgage, are in the foreclosure process or are already bank owned.
CoreLogic expects all of the shadow inventory to eventually become foreclosed homes. Foreclosed homes sell at a 20% to 30% discount to non-foreclosed homes so they represent an especially “virulent” threat to home prices, says Stan Humphries, chief economist at Internet real estate portal Zillow.com.
When adding them up, and considering the current pace of sales, CoreLogic estimates that it’ll take more than 21 months in New Jersey, Illinois and Maryland to sell the homes that are 90 days or more delinquent.
The long time frames underscore the scope and magnitude of the U.S. housing recession. “It’s hitting far and wide in America,” Humphries says.
From the WSJ Developments Blog:
Another day, another troubling housing statistic: A shadow supply of millions of bank-owned and potentially foreclosed homes looms over the residential market, threatening to depress values even further and delay recovery.
The number, currently at 1.8 million units, represents a nine-month supply that, when added to the current 8.6-month supply of existing homes on the market, makes for sobering total that could depress values even further and delay recovery. A six-month supply is typically considered balanced.
Mortgage modifications likely helped whittle the shadow supply from 2 million a year ago. But, despite widespread efforts to help troubled home owners stay in their homes, CoreLogic doesn’t expect the shadow market to lighten up anytime soon.
While the trend “is improving somewhat, the current level and distressed months’ supply remain very high,” says Mark Fleming, CoreLogic’s chief economist. “The short-term weakness in prices and longer-term weakness in the drivers that affect the housing market imply that excess supply will remain high for an extended period of time.”
The usual suspects remain drags on the market: Many Americans are still unemployed as the economy hobbles toward health. Particularly troublesome for housing is that more Americans owe more on their homes than the mortgage, a factor only adding more fuel to the foreclosure crisis. Indeed, there’s another 2 million-or-so negative equity loans more than 50% “upside down” and likely to soon become part of the shadow inventory.
CoreLogic sees the most distress in New Jersey, Illinois and Maryland.
From the CS Monitor:
Conditions vary widely from state to state. By the CoreLogic analysis, the states with the largest “supply” of distressed properties (measured in months it would take to sell them) are New Jersey, Illinois, Maryland, Florida, Delaware, Georgia, Connecticut, Alabama, California, Washington, and Michigan.
Those states all exceed the national average of nine months’ supply of distressed properties that aren’t yet for sale.