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Laurel Abbott: Decrease in ‘Shadow Inventory’ a Bright Spot in Housing Market

According to CoreLogic, a nationwide residential property analytics and information provider, “shadow inventory” is down 28 percent from the height in January 2010.

“Shadow inventory” is made up of the seriously delinquent mortgages that are in or starting in the foreclosure process as well as properties now owned by banks (REOs). This rather frightening term has been the fear factor in our housing recovery.

Many experts were predicting a tidal wave of foreclosures that could derail values and send us back into an unhealthy real estate environment. Reports such as the one from CoreLogic give us hope that a tsunami is not on the way.

“The shadow inventory is declining steadily as properties continue to move through the distressed pipeline,” said Mark Fleming, chief economist for CoreLogic. “States like California, Arizona and Colorado are experiencing significant declines year over year in the stock of serious delinquencies, a positive sign for further improvement of the shadow inventory.”

In addition, local loan broker and Popular Economics publisher Harlan Green highlighted in his article last week another positive indicator: The Mortgage Bankers Association reported that delinquency rates — loans that are at least one payment past due but not in foreclosure — are at the lowest levels since 2008.

The severe lack of inventory has us all hoping for some sort of tidal event in which homes are coming to market so we have something to sell all these ready, willing and able buyers. Where are the houses going to come from? I read one article on Yahoo! Real Estate that predicted a wave of baby-boomer sell-offs in the coming years as the boomers age out of their traditional homes and downsize or go to retirement locales.

We can’t count on the boomers to give up their houses in Santa Barbara. Where else would someone want to retire? We’ll most likely have a high rate of boomers “aging in place.” Mark Schniepp highlighted in his economic review last year that the number of Santa Barbarans who move to “heaven” yearly is only at 11 percent, dramatically lower than the nationwide average.

All good things, don’t get me wrong, but these are traditional inventory streams that we can’t count on. I’m going to look into who’s building. Stay tuned ...

Laurel Abbott is a real estate agent with Prudential California Realty and president of the Santa Barbara Association of Realtors. Contact her at .(JavaScript must be enabled to view this email address) or 805.879.8050. The opinions expressed are her own.

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