14.8 % Decrease in Shadow Inventory of Distressed Real Estate. Good News for U.S. Real Estate

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Shadow Inventory which is also known as pending supply is generally calculated by looking at the number of seriously delinquent mortgages, homes in various stages of foreclosure, and bank owned properties (REO) that are not currently listed on multiple listing services. Many times this phrase of shadow inventory is used to gauge if there is an going to be a glut of bank owned and distressed homes that are waiting to be unloaded on the real estate market in the coming months. According to CoreLogic, as of April 2012, 1.5 million homes are in shadow inventory, which is a 14.8 percent decrease from last year in April when the number of homes hiding in the shadows was 1.8 million. The current level of shadow inventory is at the lowest since October 2008 and represents a supply of four months compared to a supply of 6 months a year ago.

“Since peaking at 2.1 million units in January 2010, the shadow inventory has fallen by 28 percent. The decline in the shadow inventory is a positive development because it removes some of the downward pressure on house prices,” said Mark Fleming, chief economist for CoreLogic. “This is one of the reasons why some markets that were formerly identified as deeply distressed, like Arizona, California and Nevada, are now experiencing price increases. Out of the 1.5 million properties counted as shadow inventory, most are in the seriously delinquent category. With 720,000 seriously delinquent properties, this represents a supply of two months. About 410,000 are in some stage of foreclosure, a supply of 1.1 months, and 390,000 are already in REO, also a supply of 1.1 months.

States with the highest decrease in serious delinquencies, which are the main driver of the shadow inventory, were Arizona (-37.0 percent), California (-28.0 percent), Nevada (-27.4 percent), Michigan (-23.7 percent) and Minnesota (-18.1 percent). The actual dollar amount of shadow inventory as of April 2012 was $246 billion, down from $270 billion a year ago and a three-year low.

If you are interested in buying off market assets throughout the state of Florida, which are properties that are in various stages of foreclosure for both large blocks of residential real estate and for commercial properties contact me using the contact form on this site. I have access to distressed real estate packages including unfinished residential subdivisions at deep discounts as well as special use projects/commercial projects.

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