The inventory of distressed loans that are lurking in the shadows has diminished over the past year. Meanwhile, the number of months needed to sell all distressed properties improved over the past quarter.
The shadow inventory was 1.6 million housing units as of Oct. 31, according to data released Wednesday by CoreLogic. There was no change from the level as of July 31.
The inventory is calculated by determining the number of distressed properties not currently listed on multiple listing services. Distressed loans included around 0.8 million loans that are at least 90 days delinquent, 0.4 million loans in some state of foreclosure and 0.4 million mortgages converted to real estate owned.
The shadow inventory has fallen from 1.9 million units in October 2010.
“Currently, the flow of new seriously delinquent loans into the shadow inventory has been offset by the roughly equal flow of distressed (short and real-estate-owned) sales,” the report said.
The most-recent inventory of residential loans lurking in the shadows would take five months to clear out, the same as the three months earlier. In the year-earlier period, there was a seven-month supply.
Another report last month from Standard & Poor’s Ratings Service indicated that the total supply of distressed properties in the third-quarter would take 45 months to sell, improving from 47 months in the second quarter. It was only the second time since mid-2009 that the inventory improved.
CoreLogic noted that the shadow inventory is often concentrated in suburban and “exurban submarkets,” where distressed sales compete with new construction. The inventory continues to dampen new home sales. New home sales, which normally account for 12 percent of all activity, currently represent 7 percent of all home sales.
The report indicated that for every two properties listed for sale, one is in the shadow inventory.
