Firm commentary: The article below discusses the current state of “shadow inventory” of homes in the United States. That inventory is down slightly but has remained fairly steady since the implementation of HAMP. Most of the decrease comes from a reduction in REO property inventory. After home loans are modified, 40% of those homeowners RE-DEFAULT which helps to maintain the level of inventory. Over a million homes are approaching foreclosure and in “serious delinquency”.
Overall, foreclosure filings, indicating initiation of various stages of foreclosure, are at a 5 year low. As of July 2012, Florida, California, Illinois, New York and New Jersey make up 45 percent of all distressed properties in the country. The 10% drop in shadow inventory is a step in the right direction and the graph contained in the article indicates a downward trend. However, changes in the California law implementing the Homeowner Bill of Rights could slow liquidation down in our state.
With the election debates dominating the news, other major news stories have been put on the back burner.
The ongoing housing crisis is one of them. CoreLogic, which analyzes residential property sales and inventory, reports today that residential shadow inventory fell to 2.3 million units as of July, a 10.2 percent year over year drop.
Sounds good, but there are still major problems since one reason for the change is that banks have slowed their foreclosure rates in states that have judicial foreclosure processes, according Merrill Lynch/Bank of America.
“The decline in shadow inventory has recently moderated reflecting the lower outflow of distressed sales over the past year,” said Mark Fleming, chief economist for CoreLogic. “While a lower outflow of distressed sales helps alleviate downward home price pressure, long foreclosure timelines in some parts of the country causes these pools of shadow inventory to remain in limbo for an extended period of time.”
The Wall Street Journal also reports, “It’s increasingly clear that banks–whether by design or not–aren’t going to foreclose quickly and relist all of these homes for sale. While there were 3.25 million loans that were in the foreclosure process or in default at the end of May, banks owned around 407,000 homes at the end of May, according to estimates from Barclays Capital.”
CoreLogic’s data highlights as of July 2012 include:
â€¢ As of July 2012, shadow inventory fell to 2.3 million units or six-months’ supply and represented just over three-fourths of the 2.7 million properties currently seriously delinquent, in foreclosure or in REO.
â€¢ Of the 2.3 million properties currently in the shadow inventory (Figures 1 and 2), 1 million units are seriously delinquent (2.9 months’ supply), 900,000 are in some stage of foreclosure (2.5-months’ supply) and 345,000 are already in REO (1.0-months’ supply).
â€¢ The dollar volume of shadow inventory was $382 billion as of July 2012, down from $397 billion a year ago and $385 billion last month.
â€¢ Serious delinquencies, which are the main driver of the shadow inventory, declined the most from April 2012 to July 2012 in Arizona (3.2 percent), Pennsylvania (2.8 percent), New Jersey (2.3 percent), Delaware (2.2 percent) and Maine (2.2 percent).
â€¢ As of July 2012, Florida, California, Illinois, New York and New Jersey make up 45 percent of all distressed properties in the country.