For years now we’ve been hearing about “shadow inventory” and how it might suddenly come out of the shadows and cause the housing market to tumble once again.
What is shadow inventory? CoreLogic defines it as consisting of the properties that are seriously delinquent, going through foreclosure, or held as REO’s but not currently offered for sale in any Multiple Listing Service.
When shadow inventory shrinks, it’s a better sign of a housing recovery than rising prices and an increase in sales. It means there will be fewer and fewer distressed properties on the market in months to come. The fewer foreclosed houses for sale, the sooner prices will return to normal, and the sooner the markets will come back into balance – with about 6 months’ worth of inventory available at any given time.
According to a report released by CoreLogic, shadow inventory in all states has been declining for the past 16 months. This is a good sign that fewer homeowners are in trouble.
In 2010 the volume peaked at about 3 million homes that were in foreclosure or seriously delinquent and approaching foreclosure. One year ago, shadow inventory was estimated at 2.2 million. Today, the figure has fallen to just over half of the peak, to 1.7 million. This is a year-over-year decline of 22%.
Prior to the financial crisis, 600,000 – 700,000 was a normal number, so we aren’t completely over the crisis, but things are definitely looking up.
In terms of dollars, this is a $70 billion decline in the value of shadow inventory. It fell from $324 billion in January 2013 to $254 billion in January 2014.
In February 2014, 43,000 foreclosures were completed. That’s 16% less than in February 2013, when 51,000 foreclosures were completed. In February 2012, the number was 65,000.
Texas was listed #3 among the top 5 states with completed foreclosures in the 12 months ending February 2014, with 39,000. Florida topped the list at 118,000, followed by Michigan at 50,000. California reported 37,000 completed foreclosures while Georgia listed 34,000.
The good news here for Texas is that our state is not listed in the top five with respect to shadow inventory nor with respect to currently listed foreclosure inventory. This would indicate that we’ve passed the crisis and bank owned properties will have a smaller and smaller impact on our market in months to come.
This could, of course, be due to the fact that prices have been rising in most areas of Texas, so homeowners who might be in distress have regained equity and are able to sell by traditional means.
If you’re ready to become a Texas homeowner, get in touch. Today’s interest rates are still low, and as always – so are the fees at Homewood Mortgage. Call the Mike Clover Group today at 1-800-2232-7409 or apply on line at http://www.mikeclover.com.
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