CoreLogic Reports Shadow Inventory Continues to Decline in July 2012
October 09, 2012, Irvine, Calif. –
NOTE TO MEDIA: Beginning with this Shadow Inventory Report, the methodology used to estimate CoreLogic shadow inventory data has been enhanced. Specifically, CoreLogic adjusted the roll rate approach by incorporating cure rates to more accurately capture increasing foreclosure timelines. As a result of this methodology revision, previous CoreLogic shadow inventory measurements have been updated and can be found at http://www.corelogic.com/downloadable-docs/shadow-inventory-methodology.pdf. Please refer to the extended methodology section of this report for more detail.
—Declines in Shadow Inventory Foreshadow Rise in Prices—
CoreLogic® (NYSE: CLGX), a leading provider of information, analytics and business services, reported today that the current residential shadow inventory as of July 2012 fell to 2.3 million units, representing a supply of six months. This was a 10.2 percent drop from July 2011, when shadow inventory stood at 2.6 million units, which is approximately the same level the country was experiencing in March 2009. Currently, the flow of new seriously delinquent (90 days or more) loans into the shadow inventory has been roughly offset by the equal volume of distressed (short and real estate owned) sales.
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 and held as real estate owned (REO) by mortgage servicers but not currently listed on multiple listing services (MLSs). Roll rates are the transition rates of loans from one state of performance to the next. Beginning with this report, cure rates are factored in as well to capture the rise in foreclosure timelines and further enhance the accuracy of the shadow inventory analysis. Transition rates of “delinquency to foreclosure” and “foreclosure to REO” are used to identify the currently distressed non-listed 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 metrics of unsold inventory.
“Broadly speaking, the shadow inventory continued to shrink in July,” said Anand Nallathambi, president and CEO of CoreLogic. “The reduction is being driven by a variety of resolution approaches. This is yet another hopeful sign that the housing market is slowly healing.”
“The decline in shadow inventory has recently moderated reflecting the lower outflow of distressed sales over the past year,” said Mark Fleming, chief economist for CoreLogic. “While a lower outflow of distressed sales helps alleviate downward home price pressure, long foreclosure timelines in some parts of the country causes these pools of shadow inventory to remain in limbo for an extended period of time.”
Data Highlights as of July 2012:
- As of July 2012, shadow inventory fell to 2.3 million units or six-months’ supply and represented just over three-fourths of the 2.7 million properties currently seriously delinquent, in foreclosure or in REO.
- Of the 2.3 million properties currently in the shadow inventory (Figures 1 and 2), 1 million units are seriously delinquent (2.9 months’ supply), 900,000 are in some stage of foreclosure (2.5-months’ supply) and 345,000 are already in REO (1.0-months’ supply).
- The dollar volume of shadow inventory was $382 billion as of July 2012, down from $397 billion a year ago and $385 billion last month.
- Serious delinquencies, which are the main driver of the shadow inventory, declined the most from April 2012 to July 2012 in Arizona (3.2 percent), Pennsylvania (2.8 percent), New Jersey (2.3 percent), Delaware (2.2 percent) and Maine (2.2 percent).
- As of July 2012, Florida, California, Illinois, New York and New Jersey make up 45 percent of all distressed properties in the country.
The full Q2 2012 Shadow Inventory Report with additional charts and roll rate information is available here.
CoreLogic uses its Loan Performance Servicing and Securities databases to size the number of 90+ day delinquencies, foreclosures and real estate owned (REO) properties. Cure rates, which measure the proportion of loans in one stage of default that cured (versus moving to more severe states of default), are applied to the number of loans in default at each stage of default. CoreLogic calculates the share of loans in default that are currently listed on MLS by matching public record properties in default to MLS active listings. It applies the percentage of defaulted loans that are currently listed to the estimate of outstanding loans that will proceed to further stages of default to calculate the pending supply inventory and adds that to the reported visible inventory. Visible inventory for existing homes and new homes is reported by the National Association of Realtors and the Bureau of the Census, respectively. To determine months' supply for visible and shadow inventories, CoreLogic uses the number of non-seasonally adjusted home sales according to CoreLogic data.
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