The time it will take to clear the nation’s shadow inventory contracted one month in the first quarter to 46 months, just enough to slow the rate of home price declines, according to Standard & Poor’s Rating Services.

Residential mortgage liquidation rates in the quarter appeared stable to S&P analysts, who six months ago projected a 45-month rate. The rates varied widely between states, preventing a significant reduction in the months-to-clear estimate.

“On a more positive note, the rate at which properties enter the shadow inventory slowed during the first quarter to the lowest level since May 2007,” said S&P credit analyst Jacques Alcabes.

The minute contraction in S&P’s months-to-clear estimate is indicative of the movement of home prices to recent post-recession lows. The company’s 10-city composite index experienced an annual home price decline of 3.6% in February, while the 20-city composite index declined 3.5% from a year earlier. 

The rates are a slight improvement from January when the former index declined 4.1% and the latter fell 3.9%, year-over-year. 

But hidden within that one-month fall-off are housing markets holding inventory that is shrinking enough to boost home prices. In Phoenix, prices increased in March 7.7% over last year, and in New York prices are up 2% annually, according to CoreLogic (CLGX)

The Santa Ana, Calif.-based real estate analytics firm found that home prices nationally declined a slight 0.6% in March versus a year earlier.

“This spring the housing market is responding to an improving balance between real estate supply and demand which is causing stabilization in house prices,” Mark Fleming, CoreLogic chief economist, said.

“Although this has been the case in each of the last two years, the difference this year is that stabilization is occurring without the support of tax credits and in spite of a declining share of REO sales,” Fleming said.


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