Significant Reduction in Shadow Inventory for the First Half of 2012


JPMorgan Chase analysts recently reported a significant reduction in shadow inventory in the first half of 2012.  Shadow inventory is harmful and is known for creating uncertainty in the housing market. In calculating the shadow inventory, Chase researchers included troubled mortgages that haven’t been paid in at least 60 days.

In summary (for the first six-months of 2012):

  • 335,000 short sales were completed
  • 420,000 loan modifications done
  • 470,000 REO properties sold (these three combining for a 1.225 million inventory reduction)

By year end, Chase analysts stated that for the entire year of 2012:

  • REO sales would reach 950,000 foreclosed properties
  • 670,000 short sales would occur
  • 800,000 loan modifications (with short sales and loan mods being driven somewhat by the $25 billion settlement with the five largest mortgage servicers earlier this year)

Chase economists note that a 10 percent price rise in housing would reduce the current 10.8 million homes underwater to 9 million—an almost 17 percent reduction. Their analysts did acknowledge that loan modification re-defaults and new delinquencies will increase future distressed issues, though current rising prices may impact that.

What does all this data point to?  It points to a housing market that continues to improve and is on an upward tick. Are we back to peak levels?  No, but markets are improving!

Source:  Housing Wire

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