Shadow inventory isn’t a problem… is that a problem?

A new CoreLogic report says that “shadow inventory” (homes in the foreclosure process that will presumably enter the market soon) is down — in January it was 18 percent lower than a year ago. And it’s continuing to drop.

For a while, there was much being made about shadow inventory and how it was going to flood the market, lower prices, and stall the recovery. (We argued against that a-plenty, but there were still a good number of pundits who spread the fear.)

Courtesy CoreLogic

Further, shadow inventory was seen as a sort-of-hidden barometer of the market. The more there was, the more indication that people were still being foreclosed upon. It was a sign of an unhealthy market.

Virginia, by the way, is in the middle of the pack. As of January, between 5 and 6 percent of mortgages are 90 or more days delinquent. Compare Nevada, Kentucky, Vermont, or six other states that have a 7+ percent delinquency rate.

So shadow inventory is down and going down. Good news, right? Probably yes. But there’s another issue.

In some ways, shadow inventory was kind of like the market’s inventory reserves. It trickled into the MLS relatively slowly, which was great when inventory was high (it didn’t push prices down). Now, though, as more areas are seeing a lack of inventory as a problem, a  little shadow inventory might be a good thing.

My spider-sense tells me that the fate of shadow inventory is something worth keeping an eye one. How much, I wonder, is sitting in REO right now — officially off CoreLogic’s radar, but still not on the market.

About Andrew Kantor

Andrew is VAR's editor and information manager, and -- lessee now -- a former reporter for the Roanoke Times, former technology columnist for USA Today, and a former magazine editor for a bunch of places. He hails from New York with stops in Connecticut, New Jersey, Cincinnati, Columbus, and Roanoke.
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One Response to Shadow inventory isn’t a problem… is that a problem?

  1. Rachael Hite says:

    Love the spider sense reference. I think there is still a great deal OFF the radar that CoreLogic is not picking up. There are still many houses in the area that have been abandoned, and not claimed by any asset management company or bank yet. The closing attorneys are becoming more and more cautious with the process, which in returns places many homes in limbo, in default, but not in foreclosure for several months. Many people are still living pay check to pay check and it can literally take a medical emergency, income loss, or even expensive car repairs. I’m ready for recovery, but I’m not quite sure if we are there yet.

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