(Source: USA TODAY)
By Julie Schmit, USA TODAY
The U.S. had 1.8 million distressed homes in January that had yet to be listed for sale, a "shadow inventory" that is expected to weigh on home prices for years.
Market researcher CoreLogic said Wednesday that the shadow inventory had shrunk slightly the past year, from 2 million homes in January 2010.
The dip was driven by an improving economy, which helped more people stay current on their mortgages, strengthening in some home prices last year and more loan modifications, says Sam Khater, CoreLogic senior economist.
Khater expects the numbers to keep falling with an improving economy. But risks remain, including renewed declines in U.S. home prices and any hit to the national economic recovery.
Even if the biggest increases are over, the situation "will be shaky for some time," Khater says.
As defined by CoreLogic, the shadow inventory includes homes that are more than 90 days delinquent on the mortgage, are in the foreclosure process or are already bank owned.
CoreLogic expects all of the shadow inventory to eventually become foreclosed homes. Foreclosed homes sell at a 20% to 30% discount to non-foreclosed homes so they represent an especially "virulent" threat to home prices, says Stan Humphries, chief economist at Internet real estate portal Zillow.com.
The nation's universe of distressed homes is even bigger than the shadow inventory.
CoreLogic says that supply also includes homes whose mortgages are 90 days or more past due that may become current and those with mortgages 90 days or more past due that are already listed for sale.
When adding them up, and considering the current pace of sales, CoreLogic estimates that it'll take more than 21 months in New Jersey, Illinois and Maryland to sell the homes that are 90 days or more delinquent.
The long time frames underscore the scope and magnitude of the U.S. housing recession. "It's hitting far and wide in America," Humphries says.
Some states that were hit early and hard by the real estate bust -- and are now seeing more robust sales -- don't have as much of an overhang of distressed homes.
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