The shadow inventory-the number of homes in the foreclosure pipeline–is down 33 percent from a year ago and now is at its lowest level since August 2008, at least one year before the notion of a foreclosure shadow inventory was recognized.

Shadow Inventory is a Shadow of Itself

October 8, 2013 in Beyond Today’s News, Foreclosure Situation, Housing Markets, Market Trends, Opportunities, Recovery Signals 1 Comment

The shadow inventory-the number of homes in the foreclosure pipeline-is down 33 percent from a year ago and now is at its lowest level since August 2008, at least one year before the notion of a foreclosure shadow inventory was recognized.

According to CoreLogic’s August National Foreclosure Report, the overall residential shadow inventory as of July 2013 was 1.9 million homes, accounting for a value of $293 billion and representing a supply of 3.7 months. This was down 22 percent from a year ago, when it was at 2.4 million, and down 38 percent from its peak in 2010, when it reached 3 million homes.

CoreLogic also reported there were 48,000 completed foreclosures in the U.S. in August of 2013, down from 72,000 in August 2012, a year-over-year decrease of 34 percent. On a month-over-month basis, completed foreclosures increased 1.3 percent, from 47,000 in July 2013*.

As a basis of comparison to the 48,000 completed foreclosures reported for August 2013, prior to the decline in the housing market in 2007, completed foreclosures averaged 21,000 per month nationwide between 2000 and 2006. Completed foreclosures are an indication of the total number of homes actually lost to foreclosure.

Since the financial crisis began in September 2008, there have been approximately 4.5 million completed foreclosures across the country. As of August 2013, approximately 939,000 homes in the U.S. were in some stage of foreclosure, known as the foreclosure inventory, compared to 1.4 million in August 2012, a year-over-year decrease of 33 percent. Month over month, the foreclosure inventory was down 3.2 percent from August 2013 to July 2013. The foreclosure inventory as of August 2013 represented 2.4 percent of all homes with a mortgage compared to 3.3 percent in August 2012.

At the end of August 2013, there were approximately 2.1 million mortgages, or 5.3 percent, in serious delinquency (SDQ, defined as 90 days or more past due, including those loans in foreclosure or real estate owned, REO). The rate of seriously delinquent mortgages is at its lowest level since December 2008.

“The foreclosure inventory continues to improve, as exhibited by these recent numbers,” said Dr. Mark Fleming, chief economist for CoreLogic. “A surge in completed foreclosures and a rise in the foreclosure inventory is unlikely given continued house price improvements and shortages of supply in many markets.”

“Over the past year, the value of the U.S. shadow inventory dropped by $87 billion-a sign of increased normalcy in the housing market,” said Anand Nallathambi, president and CEO of CoreLogic. “With a year-over-year decrease of 22 percent in July, the shadow inventory has now declined steadily for 10 consecutive months.”

Foreclosure Highlights:

The five states with the highest number of completed foreclosures for the 12 months ending in August 2013 were: Florida (111,000), Michigan (60,000), California (58,000), Texas (43,000) and Georgia (40,000).These five states accounted for almost half of all completed foreclosures nationally.
The five states with the lowest number of completed foreclosures for the 12 months ending in August 2013 were: District of Columbia (94), North Dakota (463), Hawaii (492), West Virginia (501) and Wyoming (723).
The five states with the highest foreclosure inventory as a percentage of all mortgaged homes were: Florida (7.9 percent), New Jersey (6.2 percent), New York (4.9 percent), Maine (4.0 percent) and Connecticut (3.9 percent).
The five states with the lowest foreclosure inventory as a percentage of all mortgaged homes were: Wyoming (0.4 percent), Alaska (0.6 percent), North Dakota (0.7 percent), Nebraska (0.7 percent) and Colorado (0.7 percent).

Shadow Inventory Highlights:

As of July 2013, shadow inventory was under 2 million properties, representing 3.7 months’ supply or 85 percent of the 2.2 million properties that were seriously delinquent, in foreclosure or REO.
Of the fewer than 2 million properties in the shadow inventory, 874,000 properties were seriously delinquent (1.8 months’ supply), 661,000 were in some stage of foreclosure (1.3 months’ supply) and 318,000 were already in REO (0.6 months’ supply).
The value of shadow inventory was $293 billion as of July 2013, down from $380 billion in July 2012.

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 or held as 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.

*July data was revised. Revisions are standard, and to ensure accuracy, CoreLogic incorporates newly released data to provide updated results.

Judicial Foreclosure States Foreclosure Ranking (Ranked by Completed Foreclosures):

Judicial States	August 2013
Judicial States	Foreclosure Inventory	Foreclosure Inventory Pct. Point Change from a Year Ago	Completed Foreclosures (12 months ending August 2013)	Serious Delinquency Rate
National	2.4%	-1.0%	658,463	5.3%
Florida	7.9%	-3.6%	111,005	12.4%
Illinois	3.3%	-2.0%	31,054	7.1%
Ohio	2.4%	-1.0%	27,909	5.6%
Indiana	2.3%	-1.1%	17,510	5.2%
Pennsylvania	2.7%	-0.5%	13,578	5.6%
Oklahoma	2.1%	-0.7%	11,347	4.7%
South Carolina	2.5%	-0.9%	9,566	5.0%
Louisiana	1.8%	-0.6%	5,959	5.1%
Maryland	3.5%	-0.9%	4,474	7.3%
Iowa	1.7%	-0.5%	4,374	3.3%
New Jersey	6.2%	-0.9%	3,996	10.8%
Connecticut	3.9%	-0.7%	3,861	6.9%
Kansas	1.2%	-0.5%	3,690	3.5%
New York	4.9%	-0.4%	3,670	8.0%
Massachusetts	1.7%	-0.4%	2,971	4.9%
New Mexico	2.7%	-0.8%	2,620	4.9%
Kentucky	1.8%	-0.8%	2,121	4.6%
Nebraska	0.7%	-0.2%	1,723	2.3%
Delaware	2.8%	0.0%	1,491	6.3%
Maine	4.0%	-0.4%	762	6.8%
Hawaii	3.6%	-0.7%	492	5.5%
North Dakota	0.7%	-0.1%	463	1.2%
South Dakota	0.8%	-0.3%	N/A	2.0%
Vermont	2.2%	-0.4%	N/A	3.9%

Non-Judicial Foreclosure States Foreclosure Ranking (Ranked by Completed Foreclosures):

Non-Judicial States	August 2013
Non-Judicial States	Foreclosure Inventory	Foreclosure Inventory Pct. Point Change from a Year Ago	Completed Foreclosures (12 months ending August 2013)	Serious Delinquency Rate
National	2.4%	-1.0%	658,463	5.3%
Michigan	1.0%	-0.7%	59,535	4.0%
California	1.0%	-1.2%	58,068	3.3%
Texas	1.1%	-0.3%	42,522	3.5%
Georgia	1.6%	-0.7%	39,827	5.3%
North Carolina	1.4%	-0.9%	26,577	4.4%
Arizona	0.9%	-1.1%	25,911	2.9%
Tennessee	1.1%	-0.6%	19,876	4.8%
Washington	1.9%	-0.4%	19,839	5.1%
Missouri	0.9%	-0.4%	14,147	3.5%
Colorado	0.7%	-0.6%	12,874	2.4%
Virginia	0.8%	-0.6%	12,824	3.2%
Minnesota	0.8%	-0.6%	11,071	2.9%
Nevada	3.7%	-1.2%	10,229	8.6%
Wisconsin	1.2%	-0.8%	9,413	3.3%
Alabama	1.2%	-0.3%	6,857	5.0%
Arkansas	1.5%	-0.1%	5,228	5.3%
Idaho	1.8%	-0.7%	3,906	3.7%
Utah	1.1%	-0.3%	3,698	3.4%
Oregon	2.6%	-0.6%	3,206	4.7%
New Hampshire	1.1%	-0.5%	2,099	3.5%
Rhode Island	2.4%	-0.8%	1,592	6.8%
Mississippi	1.6%	-0.7%	1,169	6.1%
Montana	0.8%	-0.5%	1,122	2.1%
Alaska	0.6%	-0.1%	840	1.8%
Wyoming	0.4%	-0.1%	723	1.8%
West Virginia	1.0%	-0.4%	501	3.3%
District of Columbia	2.1%	-0.3%	94	5.1%