Drop in Shadow Inventory of U.S. Housing

May 07, 2014

In this week’s chart, we examine the improving housing market and its outlook in terms of pricing stability as it relates to the number of homes in shadow inventory. To be brief, shadow inventory (courtesy of CoreLogic) represents the number of properties that are seriously delinquent, in foreclosure, and/or held by mortgage servicers that are expected to come to market in the future. During the recession, experts feared a second major dip in home prices would result from banks unloading the historically high number of distressed homes on their balance sheets.

Since 2009, the number of houses that comprise the shadow inventory has declined from roughly 3M to around 1.7M, thus approaching pre-recession levels. Homes prices, illustrated by the Case-Shiller Index, have continued to rebound from their 2011 lows. This represents a significant improvement in the housing market and as the shadow inventory continues to decrease the chances of a secondary dip in home prices becomes less likely.

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

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