US ’shadow housing inventory’ at 1.7m, CoreLogic says

Posted by Stacy-Marie Ishmael on Dec 17 20:39.

The “shadow” housing inventory in the US rose to 1.7m units in the third quarter of 2009, according to estimates by FirstAmerican CoreLogic, a provider of real estate data.

The data provider defines this pending housing supply, which stood at 1.1m in the same period a year ago, as:

real estate owned (REO) by banks and mortgage companies, as a result of foreclosures and other actions, such as deeds in lieu, as well as real estate that is at least 90 days delinquent.

This shadow inventory is not traditionally included in official measures of unsold inventory, which, as the Wall Street Journal pointed out, makes the exact level of supply in the US housing market “impossible to pin down”.

According to the WSJ, recent estimates by BarCap suggested banks and mortgage investors had 639,000 foreclosed homes for sale across the US:

That’s equivalent to more than 10% of expected U.S. home sales this year. The bank-owned homes are largely concentrated in Florida, California, Arizona and Nevada.

The estimate by FirstAmerican CoreLogic is even more aggressive (emphasis ours):

At the current sales rate, the pending supply is 3.3 months, up from 2.4 months a year ago. The months’ supply measures how quickly the inventory will run off given the current sales rate.

• The visible supply of unsold inventory was 3.8 million units in September 2009, down from 4.7 million a year earlier. The visible inventory measures the unsold inventory of new and existing homes that are currently on the market. The visible months’ supply fell to 7.8 months in September 2009, down from 10.1 months a year earlier.
• The total unsold inventory (which combines the visible and pending supply) was 5.5 million units in September 2009, down from 5.7 million a year ago. The total months’ supply was 11.1 months, down from 12.7 a year earlier. This indicates that while the visible months’ supply has decreased and is beginning to approach more normal levels, adding in the pending supply reveals there is still quite a bit of inventory that will impact the housing market for the next few years, especially in the context of the current increase in home sales, which is in part due to artificially low interest rates and the homebuyer tax credit.

FirstAmerican CoreLogic chart of Visible vs Pending Months' Supply

FirstAmerican CoreLogic chart of Months' Supply Pending Inventory Detail

Related links:
Shadow inventory threatens U.S. housing recovery – Globe and Mail
Housing Won’t Collapse in 2010, says Radar Logic – HousingWire
Goldman says US gov’t boosted home prices by 5% – FT Alphaville
Very Hamp-ered – FT Alphaville