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‘Shadow’ supply of distressed homes drops dramatically

For years, housing experts have worried that a “shadow” supply of homes heading into foreclosure hangs over the market. Although that supply does exist, it appears to be shrinking quickly, according to a new report.

The housing data firm CoreLogic reported that shadow inventory stood at 1.5 million units as of April, representing a supply of only four months. That was a 15% decline from the same month a year earlier.

That four-month supply is the lowest level since 2009 and mirrors a similar drop in the number of homes listed for sale.

“The decline in the shadow inventory is a positive development because it removes some of the downward pressure on house prices,” CoreLogic chief economist Mark Fleming said. “This is one of the reasons why some markets that were formerly identified as deeply distressed, like Arizona, California and Nevada, are now experiencing price increases.”

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Shadow inventory has shrunk 28% since peaking at 2.1 million units in January 2010.

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