Report: Two years of "shadow inventory" looming over Md.'s housing market

November 23, 2010|By Jamie Smith Hopkins, The Baltimore Sun

From the Real Estate Wink blog:

In today's topsy-turvy housing market, the number of homes that soon could be for sale is just as important to know as the number that actually are.

Here's why: The so-called "shadow inventory" of seriously delinquent borrowers whose properties are in danger of landing on the housing market in Maryland are so numerous that these homes would take a full two years to find buyers at August's pace of sales, according to a new report from real estate data firm CoreLogic.

That's the worst in the nation -- in part because Maryland has been hard-hit by the foreclosure crisis, but also because the pace of sales dropped faster here than in the country as a whole after the federal homebuyer tax credit expired.

CoreLogic, which calculated the shadow-inventory figure by analyzing the number of homes whose owners were at least three months behind on their mortgages, said the top states after Maryland (at 24.4 months) were New Jersey (24.1 months), Illinois (23 months), Florida (20.8 months) and Georgia (19.5 months).

As a region, the Baltimore metro area was somewhat better off than the state as a whole. Its 18.3 months of supply ranked it 17th among the 50 largest metro areas. (Miami was tops, at just over 33 months.)

"The weak demand for housing is significantly increasing the risk of further price declines in the housing market," Mark Fleming, CoreLogic's chief economist, said in a statement. "This is being exacerbated by a significant and growing shadow inventory that is likely to persist for some time due to the highly extended time-to-liquidation that servicers are currently experiencing."

Economist Sam Khater with CoreLogic said in an email that the homebuyer tax credit "has really made analyzing the market tricky."

"Absent the impact of the tax credit, traditionally the largest months’ supply have been in the distressed states" such as Florida, Michigan and California, he wrote. "After the tax credit expired, sales collapsed throughout the US, but especially in the upper segment of the price distribution. Therefore states with above average sales prices (especially NJ/MD) experienced a collapse in sales that was larger than the US. This caused states like a NJ or MD to experience pronounced increases in months’ supply."

But how long will the "tax credit hangover" last? That's what a lot of people would like to know. The assumption is that home sales that would be happening now and into early 2011 instead were made late last year and early this year as buyers rushed to get up to $8,000 apiece.

If so, and home sales pick up the pace after early 2011, then the months' supply of shadow inventory will recede in Maryland.

Only assuming the number of seriously delinquent borrowers doesn't get worse. (At last count, fewer Marylanders were newly falling behind.)

jamie.smith.hopkins@baltsun.com

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