RealEstateEconomyWatch.com

The inventory of unlisted properties that are in the foreclosure pipeline shrank slightly over the past year but remains at a nine months’ supply.

CoreLogic reported today that short sales and loan modifications apparently have shaved the inventory by 200,000 units to 1.8 million nationwide.

CoreLogic estimates current shadow inventory, also known as pending supply, by calculating the number of distressed properties not currently listed on multiple listing services (MLS) that are seriously delinquent (90 days or more), in foreclosure and real estate owned (REO) by lenders. Properties that are not yet delinquent but may become delinquent in the future are not included in the estimate of the current shadow inventory

The residential real estate data provider reported that the shadow inventory of residential properties as of January 2011 fell to 1.8 million units, or nine months’ worth of supply, down from 2.0 million, also nine months’ supply from a year ago.  Of the 1.8-million unit current shadow inventory supply, 870,000 units are seriously delinquent (4.2 months’ supply), 445,000 are in some stage of foreclosure (2.1 months’ supply) and 470,000 are already in REO (2.2 months’ supply).

CoreLogic estimated that loan modifications and short sales could potentially reduce shadow supply by one-half, but low borrower response rates to lender outreach and high modification re-default rates would reduce impact.

In addition to the current shadow inventory supply, there are nearly 2 million current negative equity loans that are more than 50 percent “upside down” that will likely become shadow supply in the near future.

“While the trend of the shadow inventory is improving somewhat, the current level and distressed months’ supply remain very high. The short-term weakness in prices and longer-term weakness in the drivers that affect the housing market imply that excess supply will remain high for an extended period of time,” said Mark Fleming, chief economist for CoreLogic.