NAR Estimates Shadow Inventory by State

The National Association of Realtors'® (NAR) have taken a stab at estimating just how wide and deep the much discussed "shadow inventory" of housing may actually be.

 Shadow inventory is generally described as the number of homes in bank inventory waiting to be sold plus the homes in that have been foreclosed but for a variety of reasons (redemption periods, marketing or legal reasons) are being held off the market and homes where the mortgages are delinquent and are likely to eventually be foreclosed. The shadow inventory is considered to be a marker for how long it will take for a depressed housing market to return to normal.  

The study, conducted by NAR Research Economist Selma Hepp, estimates shadow inventory on a state-by-state basis using the following data sources:

• Numbers of 1st lien loans in the foreclosure inventory and a share of delinquent loans anticipated to enter foreclosure based on Lender Processing Services (LPS) roll rates.
• The share of delinquent loans already on the market based on NAR's Realtors Confidence Index (NCI) in which Realtors report what share of their sales were short sales or foreclosures.
• Loan modifications as estimated from the Office of Comptroller of the Currency/Office of Thrift supervision Mortgage Metric Q3 2010 report; the assumption is that 30 percent of the state level number will default.
• REO not currently on the market based on state level share of existing sales that are foreclosures from the NAR's RCI.

Hepp points out that the foreclosure epidemic, while a national problem, has not been evenly distributed across the country.  Four states, Arizona, California, Florida, and Nevada have suffered highest foreclosure rate and account for 42 percent of the foreclosure inventory today; adding in Illinois, New York, and New Jersey brings that number up to 60 percent.  Delinquencies seem to be easing; in the last quarter of 2010 serious delinquencies fell in all but four states and the national rate is down 38 percent.  As a general rule those seriously delinquent loans did not begin to perform, rather they entered into loan modifications, were sold pre-foreclosure or progressed from delinquent to foreclosed. As a result of the last disposition foreclosure inventories in all states rose between the third and fourth quarters of 2010.

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Source: http://www.mortgagenewsdaily.com/03252011_shadow_inventory.asp

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