1.6 million housing units in ‘shadow’ inventory
CoreLogic, a provider of analytical information about the housing market, reported that the current residential shadow inventory as of January 2012 was 1.6 million units, approximately the same level reported in October 2011. CoreLogic estimates shadow inventory by calculating the number of distressed properties not currently listed on multiple listing services (MLSs) that are seriously delinquent, in foreclosure and real estate owned (REO) by lenders.
On a year-over-year basis, shadow inventory was down from January 2011, when it stood at 1.8 million units. 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).
"Almost half of the shadow inventory is not yet in the foreclosure process," said Mark Fleming, chief economist for CoreLogic. "Shadow inventory also remains concentrated in states impacted by sharp price declines and states with long foreclosure timelines."
Anand Nallathambi, president and CEO for CoreLogic, added: "The shadow inventory remains persistent even though many other metrics of the housing market show signs of improvements. In some hard-hit markets, the demand for REO and distressed property is now outstripping supply. As we move into what is traditionally the peak selling season for real estate, servicers will certainly be watching closely to see if now is the time to move more inventory out of the shadows.”
Some data highlights from the report include:
• The shadow inventory is approximately half the size of all visible inventory listings. For every two homes available for sale, there is one home in the "shadows."
• The total percent of borrowers who were ever 60+ days delinquent (irrespective of delinquency status today) increased to 15.5% in January 2012, up from 14.3% a year ago.
• Florida, California and Illinois account for more than a third of the shadow inventory. The top six states, which would also include New York, Texas and New Jersey, account for half of the shadow inventory.
• The highest concentration of shadow inventory is for loans with loan balances between $100,000 and $125,000. More importantly, while the overall supply of homes in the shadow inventory is declining versus a year ago, the declines are being driven by higher balance loans. For loans with balances of $75,000 or less, however, the shadow is still growing and is up 3% from a year ago.
Despite pent-up demand, existing-home sales slip
Existing-home sales data released Wednesday by the National Association of Realtors (NAR) declined slightly compared with the previous month but showed gains compared with a year ago.
February existing-home sales came in at a rate of 4.59 million, down 0.9% from 4.63 million in January. Compared with a year ago, completed transactions are 8.8% higher than February 2011.
Sales were up in the Midwest and South, offset by declines in the Northeast and West.
“The market is trending up unevenly, with record high consumer buying power and sustained job gains giving buyers the confidence they need to get into the market,” said Lawrence Yun, NAR chief economist. “Although relatively unusual, there will be rising demand for both rental space and homeownership this year. The great suppression in household formation during the past four years was unsustainable, and a pent-up demand could burst forth from the improving economy.”
The national median existing-home price for all housing types was $156,600 in February, up 0.3% from February 2011. Distressed homes — foreclosures and short sales sold at deep discounts — accounted for 34% of February sales (20% were foreclosures and 14% were short sales), down from 35% in January and 39% in February 2011.
NAHB weighs in on starts statistics
The National Association of Home Builders (NAHB) believes residential construction would be stronger if not for tight lending conditions and distressed property sales.
While the rate of February building permits were at their highest rate since October 2008, the total housing starts figure released yesterday was down 1.1% from January.
“Builders are reporting increased buyer interest and are expecting demand for new homes to improve in the coming months, but continue to exercise caution regarding new projects until that interest translates into more signed sales contracts,” noted Barry Rutenberg, chairman of the NAHB and a home builder from Gainesville, Fla. “This process is certainly being slowed by today’s overly tight lending conditions, the difficulty of obtaining accurate appraisals on new construction and competition from distressed properties that can make it tough for prospective new-home buyers to sell an existing home.”
“NAHB’s most recent builder surveys have shown steady improvement in builder expectations for the next six months, and today’s report reflects that optimism in the permit numbers, which are up across the board and are typically the most statistically reliable data,” noted NAHB chief economist David Crowe. “At the same time, we believe that January’s exceptionally good weather was a factor in pulling some single-family starts activity forward that might otherwise have occurred in February.”
Following four consecutive months of gains, single-family starts declined 9.9% to a seasonally adjusted annual rate of 457,000 units in February. Meanwhile, multi-family starts, which tend to display greater volatility from month to month, gained 21.1% to a 241,000-unit rate — their fastest pace since November 2011.