Shadow Inventory, Now at 2.3 Million Units, Seen as Manageable in 2013

CoreLogic® Reports Shadow Inventory Continues Decline in October 2012

IRVINE, Calif., January 2, 2013 /PRNewswire/ — CoreLogic (NYSE: CLGX), a leading provider of information, analytics and business services, reported today that the current residential shadow inventory as of October 2012 fell to 2.3 million units*, representing a supply of seven months. The October inventory level represents a 12.3 percent drop from October 2011, when shadow inventory stood at 2.6 million units.

CoreLogic estimates the current stock of properties in the shadow inventory, also known as pending supply, by calculating the number of properties that are seriously delinquent, in foreclosure and held as real estate owned (REO) by mortgage servicers but not currently listed on multiple listing services (MLSs). Transition rates of “delinquency to foreclosure” and “foreclosure to REO” are used to identify the currently distressed unlisted properties most likely to become REO properties. Properties that are not yet delinquent but may become delinquent in the future are not included in the estimate of the current shadow inventory. Shadow inventory is typically not included in the official reporting measurements of unsold inventory.

“The size of the shadow inventory continues to shrink from peak levels in terms of numbers of units and the dollars they represent,” said Anand Nallathambi, president and CEO of CoreLogic. ”We expect a gradual and progressive contraction in the shadow inventory in 2013 as investors continue to snap up foreclosed and REO properties and the broader recovery in housing market fundamentals takes hold.”

“Almost half of the properties in the shadow are delinquent and not yet foreclosed,” said Mark Fleming, chief economist for CoreLogic. “Given the long foreclosure timelines in many states, the current shadow inventory stock represents little immediate threat to a significant swing in housing market supply. Investor demand will help to absorb the already foreclosed and REO properties in the shadow inventory in 2013.”

Data Highlights as of October 2012:

• As of October 2012, shadow inventory fell to 2.3 million units, or seven months’ supply, and represented 85 percent of the 2.7 million properties currently seriously delinquent, in foreclosure or in REO. 
• Of the 2.3 million properties currently in the shadow inventory (Figures 1 and 2), 1.04 million units are seriously delinquent (3.3 months’ supply), 903,000 are in some stage of foreclosure (2.8 months’ supply) and 354,000 are already in REO (1.1 months’ supply). 
• As of October 2012, the dollar volume of shadow inventory was $376 billion, down from $399 billion a year ago. 
• Over the three months ending in October 2012, serious delinquencies, which are the main driver of the shadow inventory, declined the most in Arizona (13.3 percent), California (9.7 percent), Michigan (6.8 percent), Colorado (6.8 percent) and Wyoming (5.9 percent). 
• As of October 2012, Florida, California, Illinois, New York and New Jersey make up 45 percent of the 2.7 million properties that are seriously delinquent, in foreclosure or in REO. In October 2011, these same states made up 51.3 percent of all the distressed mortgages that were at least 90 days delinquent, in foreclosure or REO.

*Previous data was revised. Revisions with public records data are standard, and to ensure accuracy, CoreLogic incorporates the newly released public data to provide updated results.

 October 2012 Shadow Inventory Report with additional charts and roll rate information is available here.

Figure 1: Shadow Inventory Detail
Count in Millions, Not Seasonally Adjusted

Figure 2: Months’ Supply Shadow Inventory Detail
Number of Months, Not Seasonally Adjusted

Figure 3: Months’ Supply
Number of Months, Not Seasonally Adjusted