The latest from analysts at Standard & Poor’s Ratings Services is that it may take more than four years to clear the so-called “shadow inventory” of distressed homes that aren't yet on on the market. This could, S&P says, undermine real estate prices while the backlog clears.
“Shadow inventory” is defined as properties with borrowers who are 90 days or more delinquent on their mortgage payments, properties currently or recently in foreclosure, or properties that are real estate owned (REOs).
The estimate of how long the backlog would take to clear is up 11 percent from the previous quarter and up 40 percent from a year ago. What’s interesting according to the article I saw on this is that the increase in the estimated time needed to clear the shadow inventory is due to the fact that it’s taking longer for lender to liquidate distressed properties, not because the number of distressed properties is growing, the S&P analysts say.
The good news, says S&P, is that the overall level of distressed loans continues to decline, and that loan-cure success rates (most often the result of loan modifications) have been improving since the second half of 2008.
An interesting statistic from the article is that although some 45-50% of the loans modified or cured in the fourth quarter of 2009 re-defaulted within the first year of modification, that's an improvement from the nearly 80% re-default rate on loans modified or cured during the first quarter of 2008.
I wasn’t able to get the number for the greater Sacramento area but will post those if I can get them. all4now
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