Research estimates 'pending supply' of residential homes

As of September 2009, First American CoreLogic estimated there was a 1.7-million-unit pending supply of residential housing inventory, up from 1.1 million a year earlier.

Pending supply, sometimes referred to as ''shadow'' inventory, estimates real estate owned (REO) by banks and mortgage companies, as a result of foreclosures and other actions, such as deeds in lieu, as well as real estate that is at least 90 days delinquent.

Normally shadow inventory would not be included in the official measures of unsold inventory.

At the current sales rate, the pending supply is 3.3 months, up from 2.4 months a year ago. The months' supply measures how quickly the inventory will run off given the current sales rate.

The visible supply of unsold inventory was 3.8 million units in September 2009, down from 4.7 million a year earlier.

The visible inventory measures the unsold inventory of new and existing homes that are currently on the market. The visible months' supply fell to 7.8 months in September 2009, down from 10.1 months a year earlier.

The total unsold inventory (which combines the visible and pending supply) was 5.5 million units in September 2009, down from 5.7 million a year ago.

The total months' supply was 11.1 months, down from 12.7 a year earlier.

This indicates that while the visible months' supply has decreased and is beginning to approach more normal levels, adding in the pending supply reveals there is still quite a bit of inventory that will impact the housing market for the next few years, especially in the context of the current increase in home sales, which is in part due to artificially low interest rates and the homebuyer tax credit.

First American CoreLogic utilized its LoanPerformance Servicing and Securities databases to size the number of 90+ day delinquencies, foreclosures and REOs.

Roll rates, which measure the proportion of loans that were in one stage of default that rolled to the next stage of default over a period of time, were applied to the number of loans in default by each stage of default.

This calculation allowed for estimating the number of loans that were proceeding from earlier to later stages of default. Then CoreLogic calculated the share of loans in default that are currently listed on MLS by matching public record properties in default to MLS active listings.

Published: Thu, Dec 24, 2009