A recent report by the National Association of Realtors (NAR) reveals interesting information regarding the foreclosure inventory of the hardest hit states. It is pretty well known that Arizona, Nevada, California, and Florida have been most affected by the foreclosure crisis. Together the four states make up 42 percent of the foreclosure volume in the United States. Despite this, NAR estimates it could take as little as seven months to clear the shadow inventory in some of the hardest hit states. “This is largely due to their shadow inventory moving somewhat faster through the pipe lines and comprising large share of existing sales,” the report continued.
In simple terms “shadow inventory“ describes foreclosed properties currently owned by banks (or that will be owned in the future) that are sitting empty and are not currently for sale.
There is a glut of foreclosed homes threatening to hit the market over the next couple of years, potentially delaying any recovery.
There were 1.7 million homes either owned by the bank or in some stage of foreclosure at the end of the third quarter of 2010, according to a recent report by Standard & Poor’s. The 2010 estimates said that it would take 44 months, at the current rate of sales, to sell them off — a 25% increase from the beginning of 2010. (S&P does not count home loans backed by Fannie Mae and Freddie Mac.)
But the situation is improving somewhat. The Mortgage Bankers Association reported that in the last quarter of 2010, 90-plus day delinquencies fell in these four hard-hit states. At the same time, total non-current loans have dropped 38 percent nationally. In addition, NAR found that distressed sales are making up a larger percentage of the current transactions.
Distressed sales currently make up 55 percent of existing sales in Arizona and nearly 70 percent in Nevada. The NAR report calculates the number of months it would take each state to clear its shadow inventory, by dividing the shadow inventory by the monthly number of distressed sales.
Using this formula, NAR found it would take 51 months to clear the shadow inventory in New Jersey, where only about 20 percent of existing home sales are distressed sales.
By contrast, Nevada’s distressed sales make up 70 percent of existing home sales, and by NAR’s calculations, the states shadow inventory could be cleared in as little as 7 months.
NAR calculated it would take 21 to 30 months to clear the shadow inventory in several states, including Florida, Louisiana, Hawaii, and Washington.
Like Nevada, Arizona fell into the 7-10 month range.
The majority of the states fell within the 11 to 20 month range, including California and Texas.
The Bremner Group at Coldwell Banker
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Accredited Buyer Representative|Certified Distressed Property Expert |Pre-Foreclosure Specialist Certified
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