The number of homes facing foreclosure or recently repossessed by lenders–also known as shadow inventory– jumped 10 percent during the past year. This in turn extended the current rate of home sales to an eight-month supply.
2.1 Million Homes in Inventory
According to the report, issued by CoreLogic, a financial information provider, there were 2.1 million homes in the officially uncounted inventory as of the end of August. This is a major jump from the 1.9 million homes listed in this inventory 12 months prior.
The problem with this much inventory is that the extra supply will most likely continue to decrease home prices and make it that much more difficult for homeowners to sell at prices anywhere near what they originally paid. In addition, the housing market as a whole will have that much longer to recover.
More Foreclosures to Go
What’s more problematic about the number of shadow inventory properties is even more foreclosures that are currently frozen while under investigation may be dumped into the pot. One adjustment that could spare the market some is if mortgage loan servicers currently under investigation are forced into loan modifications as some predict.
Since several servicers like GMAC, JPMorgan and Bank of America are in trouble for robo-signing foreclosure documents and may have to agree to a settlement, many homeowners who were going to be evicted may have a second chance at holding on to their mortgages via modifications such as lowering the principal or reducing interest rates.
Even if the modifications are agreed upon, they would not affect the homes that are currently sitting uninhabited. This just shows that these stats, along with data released Monday morning that found the economy is not to improve much in 2011, prove that we still have a ways to go before we will actually see proof that the recession has come to an end.
