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Shadow Inventory Far Less than Previously Forecasted

A projection last year suggested that 2 million negative-equity mortgages were likely to flood the shadow inventory. Fast forward a year and the inventory has fallen by around 200,000 units, while the time needed to clear out the properties has declined by three months.

A year ago, when the shadow inventory was already 1.8 million units, CoreLogic predicted that another nearly 2 million negative-equity loans which were more than 50 percent upside-down at the time would “likely become shadow supply in the near future.”

But data released Wednesday from the Santa Ana, Calif.-based company indicates that the forecast was way off.

According to CoreLogic, the shadow inventory stood at 1.6 million units as of January. This included 800,000 seriously delinquent loans, 410,000 mortgages in some stage of foreclosure and 400,000 real-estate-owned assets.

The report said that the year-over-year improvement has been concentrated in high-balance loans, as loans with balances not exceeding $75,000 have climbed 3 percent from a year earlier and loans with balances between $100,000 and $125,000 make up the highest concentration of the shadow inventory.

There has been no change from the 1.6 million pending supply reported by the information services provider three months earlier.

“Currently, the flow of new seriously delinquent (90 days or more) loans into the shadow inventory has been offset by the roughly equal flow of distressed sales (short and real estate owned),” today’s report said.

Still, the inventory sits well above the 380,000 properties as of the middle of 2006 — the peak of the housing bubble and the low point for the shadow inventory.

The report indicated that for every property listed for sale, there is another one lurking in the “shadows.”

More than a third of the shadow inventory is properties located in California, Florida and Illinois.

The latest figures represent a six-month supply, worsening from the five-month supply reported three months ago but an improvement from the nine-month supply reported a year ago.

CoreLogic determines the shadow inventory by calculating how many distressed loans are not already included in multiple listing services. This includes mortgages that are at least 90 days past due, loans in foreclosure and REO assets.

CoreLogic estimates that there are currently 3 million distressed loans.

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