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Shadow Inventory Exceeds 3 Years

A new report indicates that the nation’s shadow inventory took a turn for the worse. It would now take more than three years to clear it out.

The shadow inventory has climbed to $460 billion.

The findings were outlined in the Shadow Inventory Update from Standard & Poor’s. The report analyzes data from privately securitized mortgages.

Among properties in the shadow inventory are those where the borrower was recently 90 days or more past due, home in the process of foreclosure and real estate owned by the lender.

The New York-based ratings agency said its estimate of the current inventory represents nearly one-third of the non-agency residential mortgage-backed securities market currently outstanding.

“While our estimates for the time it will take to clear the supply of distressed homes on the market have declined after reaching a peak in mid-2008, the number has been on the rise again since fall of 2009,” S&P managing director Diane Westerback said in the report.

S&P said the shadow inventory is skewing the supply of distressed properties for sale and placing downward pressure on home prices.

“Our estimate for the months to clear the shadow inventory for the U.S. as a whole increased about 18 percent between the end of fourth-quarter 2009 and the end of second-quarter 2010,” said S&P credit analyst Nancy Reeis in the statement.

Based on the fourth-quarter 2009 report, when it took around an estimated 33 months to clear out the shadow inventory, the number of months has climbed to around 39.

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