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How 'Shadow Inventory' Will Impact Housing in 2013

Wondering how "Shadow Inventory" will Impact Housing in 2013? Will we see a flood of new foreclosures or will new bank REOs just continue to sprinkle on our housing market?

According to Corelogic, new reports show that current residential shadow inventory as of the end of Q3 fell to 2.3 million units, representing a supply of seven months.

This was a drop of 12 percent from 2011 levels, when shadow inventory stood at 2.6 million units, and it represents the lowest level of deliquent to foreclosed homes since 2009! 

As of October 2012, shadow inventory fell to 2.3 million units, or seven months’ supply, and represented 85 percent 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, slightly more than 1.04 million housing units are seriously delinquent (3 months’ supply), 900,000 are in some stage of foreclosure (2.8 months’ supply) and 354,000 are already bank REO's (1 months’ supply). This explains why we see bank REO's or foreclosures getting multiple offers across our market today.  With only 1 months' supply of existing bank inventory the banks are effectively in a Seller's Market not a Buyer's Market anymore.  

Of the rest, the 900,000 in some stage of foreclosure may never see bank REO status because of loan modifications, short sales, loan refinancing, etc.. So more than one-third of these homes may never be available or only momentarily available via short sale to the buying public. Certainly should not detract or dent our recovery in housing.  The same could be said for the million or so properties that are in a seriously delinquent state.

Corelogic continues to report that as of October 2012, "the dollar volume of shadow inventory was $376 billion, down from $399 billion a year ago. Over the three months ending in October 2012, serious delinquencies, which are the main driver of the shadow inventory, declined the most in Arizona (13.3 percent), California (9.7 percent), Michigan (6.8 percent), Colorado (6.8 percent) and Wyoming (5.9 percent)."

“The size of the shadow inventory continues to shrink from peak levels in terms of numbers of units and the dollars they represent,” said Anand Nallathambi, president and CEO of CoreLogic. “We expect a gradual and progressive contraction in the shadow inventory in 2013 as investors continue to snap up foreclosed and REO properties and the broader recovery in housing market fundamentals takes hold.”

“Almost half of the properties in the shadow are delinquent and not yet foreclosed,” said Mark Fleming, chief economist for CoreLogic. “Given the long foreclosure timelines in many states, the current shadow inventory stock represents little immediate threat to a significant swing in housing market supply. Investor demand will help to absorb the already foreclosed and REO properties in the shadow inventory in 2013.”

The latest facts point to a very bullish real estate market here in the Greater Metro Atlanta area. Click here for the TOP 10 Drivers of Housing Demand in 2013.  It is a great time to buy the home of your dreams and set an incredibly low mortgage rate.  These opportunities will not last forever as home prices and mortgage rates rise in the future.   

Please Contact Me For Additional Insight About The Opportunities For Real Estate In 2013.    

For more information feel free to call Hank Bailey at (678) 252-9257, email to hankbailey@prudentialgeorgia.com or follow @PrudentialGARE on twitter. 

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