Real estate shadow inventory making rapid decline

Shadow Inventory Decreasing

Mortgage and housing market experts have expressed very different predictions for the spring’s housing market, largely varying by location and interpretation of mortgage rates. Some reports are optimistic, while others look at poor wage growth and rising interest rates as signs that the sky is falling.

One market attribute that experts can agree on as being a positive influence is the rapid decline in the residential “shadow inventory.” After the market crash in 2009, lenders were left with significant real estate holdings. Many lenders decided to wait to put their property up for sale in order to avoid flooding the market with listings and pushing down prices, slashing any hope of potential return on investment.

The number of homes thought to be in the shadow inventory has dropped from 3 million at the peak in January 2010 to about 1.7 million in January of this year, according to Mortgage News Daily. Foreclosures also continued to fall, dropping to 43,000 in February, 15 percent lower than the level a year ago.

“Although there is good news that completed foreclosures are trending lower, the bigger news is the impressive decline in the foreclosure and shadow inventories,” said Mark Fleming, chief economist for CoreLogic to Realty News. “Every state has had double-digit, year-over-year declines in foreclosure inventory, which is reflected in the $70 billion decline in the shadow inventory.”

The article states that the real estate shadow inventory has been falling  by an average monthly rate of about 41,000 units. Almost half of all distressed properties are found in Florida, California, New York, New Jersey, and Illinois.

The gains in opportunities for lenders in these markets should be accompanied with the proper measures to accommodate higher levels of business, including automated decisioning that is customized to reflect current business requirements.

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