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Shadow Inventory To Peak in Summer of 2010: Barclays

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The shadow inventory of foreclosures should peak in the summer of 2010 before falling gradually in the later months, according to a new report from Barclays Capital. Barclays defines the shadow inventory of foreclosures as loans in 90-plus day delinquency or already in the foreclosure process. According to the report, there are currently 2.4m loans in 90-plus day delinquency and another 2.1m in foreclosure, totaling 4.5m in the shadow inventory. Analysts measured these loans in reports from Fannie Mae and Freddie Mac, their regulator the Federal Housing Finance Agency (FHFA), the Federal Deposit Insurance Corp. (FDIC), the US Department of Housing and Urban Development (HUD), the Mortgage Bankers Association (MBA) and its own resources. The shadow inventory should reach its height in the summer in 2010 before falling gradually as the market absorbs 130,000 distressed properties per month, according to the report. Over the next three years, analysts forecast 4.7m distressed sales with 1.6m in 2010, another 1.6m in 2011 and 1.5m in 2012. Barclays reported more than 478,000 loans in REO status. At the current rate the banks are trickling loans from foreclosure into REO, that number could grow to 536,000 by late 2011. If that rate increases, Barclays analysts said that number could reach 640,000 by the summer of 2012. Still, analysts said the market is unlikely to revisit the “extreme levels” of REO seen in late 2008. Write to Jon Prior.

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