Shadow Inventories a Vanishing Problem?

Shadow inventories posted the largest quarter-over-quarter decline since the housing crisis began, and dropped 23 percent year-over-year, according to Compass Point Research & Trading.

Shadow inventories — homes at risk of default that have yet to hit the market — once posed a big threat to the housing recovery. At its peak in March 2010, shadow inventory was at about 5.5 million loans, according to data compiled by the Mortgage Bankers Association and Bloomberg. For the second quarter of 2013, shadow inventory has fallen to 2.99 million.

There has been a large decline in 90-day-plus past due loans, which has helped lead to the drop in shadow inventories. Also helping to lower shadow inventories is the rise in home prices, lower unemployment rates, the higher number of loan modifications, and tightening of underwriting standards that has led to an improvement in mortgage credit quality, economists note.

Source: “Shadow Inventory Decline Begins to Accelerate,” HousingWire (Aug. 23, 2013)