One of the key obstacles to a housing recovery over the past five years has been the overhang of distressed properties about to come to market which has come to be known as shadow inventory. Shadow inventory numbers are comprised of three separate categories of properties:
- properties where the home owner is 90+ days behind on their mortgage payments
- properties that are already in the foreclosure process
- properties already foreclosed on and owned by the banks but not yet on the market
- Completed foreclosures are down 27% from a year ago
- National foreclosure inventory is down 29% from a year ago
- Seriously delinquent loans (90+ days behind) are down 22.7% from a year ago
“The stock of seriously delinquent homes, which is the main driver of shadow inventory, is the lowest level since December 2008. Over the last year, it has decreased in 42 states by double-digit figures, resulting in rapid declines in shadow inventory for the first quarter of 2013.”
How Does Compare to Historic Norms?In their latest Mortgage Monitor, LPS Senior VP Herb Blecher sheds some light on where we stand compared to historic norms:
“Though they are still approximately 1.4 times what they were, on average, during the 1995 to 2005 period, delinquencies have come down significantly from their January 2010 peak. In large part, this is due to the continuing decline in new problem loans -- as fewer problem loans are coming into the system, the existing inventories are working their way through the pipeline. New problem loan rates are now at just 0.73 percent, which is right about on par with the annual averages during 2005 and 2006, and extremely close to the 0.55 percent average for the 2000-2004 period preceding."RealtyTrac also recently reported:
"A total of 127,790 U.S. properties had foreclosure filings in June, down 14 percent from the previous month and down 35 percent from a year ago to the lowest monthly level since December 2006 — a six and a half year low."
Going Forward?A survey of industry experts produced by The Professional Risk Managers’ International Association (PRMIA) shows that the fall in delinquency rates is projected to continue in the future:
"For the first time in survey history, the number of respondents predicting that mortgage delinquencies would decrease (46.9%) exceeds those who believe the level will stay the same (40.7%)."