Explaining Southern California's economy

California 'shadow inventory' of real estate drops through October

Foreclosure

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For sale signs are posted on a foreclosed house in Glendale, California. According to CoreLogic, fewer homes in the state are headed for bank ownership.

There are more signs that the housing market is improving. Real estate analytics firm CoreLogic has just released new data on the so-called “shadow inventory” of homes. Those are properties that have delinquent mortgages, are headed into the foreclosure process, or have been foreclosed and belong to the bank, but haven't yet shown up in real estate listings.

"Don’t be afraid of the shadows," is CoreLogic's message. Why? Because nationally the shadow inventory has declined more than 12 percent since last year. During the three months that ended in October, California saw the second largest drop in the type of mortgage delinquencies that typically lead to foreclosure — almost 10 percent, behind Arizona at just over 13 percent.

California has a housing shortage at the moment. That means there’s demand for these properties. So any home that's on the verge of emerging from the shadows will rapidly find a buyer. In a statement, CoreLogic chief economist Mark Fleming addressed the national shadow inventory situation:

“Given the long foreclosure timelines in many states, the current shadow inventory stock represents little immediate threat to a significant swing in housing market supply. Investor demand will help to absorb the already foreclosed and REO properties in the shadow inventory in 2013.”

If that holds for the U.S., it should also be the case in California. But it's worth noting that it continues a trend of investors playing an active role in the state's housing market, edging out homebuyers who seek mortgages who can't bring a suitcase of cash to the deal.

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