The last time there was a reduction in the number of months needed to clear out the distressed inventory was in 2009. But that changed in June.
In the first quarter, the estimate for clearing out the shadow inventory was 52 months.
The timeline dropped to 47 months in the second quarter, Standard & Poor’s Ratings Services reported.
The decline was the first since mid-2009.
“In conjunction with stable liquidation rates, we believe these are positive signs that the amount of time it will take to clear this ‘shadow inventory’ should continue to decline over the next year,” Diane Westerback, managing director of global surveillance analytics, said in the report.
But it’s still taking six months longer than in the second-quarter 2010.
The amount of distressed inventory worked out to $405 billion, according to S&P. Three months earlier, the amount was $433 billion.
The balance of distressed assets accounted for almost a third of the country’s outstanding non-agency residential mortgage-backed securities.
“Long liquidation timelines and the accumulation of so many distressed loans are due in large part to rising court delays in foreclosure proceedings, a problem that plagues agency and non-agency loans indiscriminately,” Westerback added. “As long as these delays continue to affect the housing market, the shadow inventory remains a market-wide threat.”
