A Better Way to Measure Shadow Inventory by State


Not too long ago, Mike Orr shared a very helpful list on his website, The Cromford Report. I decided I wanted to share it with you below, because it does a much better job of putting the shadow inventory and the housing crisis into context. Here’s why.

As Mike Orr put it:

“In a state with judicial foreclosure, the lender usually takes far longer to foreclose. This means the number of recorded foreclosures in a given period will be much lower than in a similar state with non-judicial foreclosure. So the number of foreclosures in a month is NOT a good measure of how badly a state is affected by the housing crisis. A much better measure is to determine what percentage of home loans are in some state of delinquency. [...] This data tells us a lot about the true “shadow inventory” – loans that in some sort of trouble but have not yet resulted in a public record to confirm that (e.g. Notice of Default, Notice of Trustee Sale, Lis Pendens, etc.). Here are a few of the most recent numbers issued by LPS for the month of February 2012, showing the percentage of first home loans that are delinquent but have NOT received a foreclosure notice.”

Shadow Inventory by State

1. Mississippi – 13.5%
2. Georgia – 10.8%
3. Nevada – 10.5%
4. Alabama – 10.1%
5. Louisiana – 9.7%
6. Tennessee -9.7%
7. Maryland – 9.5%
8. Arkansas – 9.2%
9. West Virginia – 8.9%
10. Rhode Island – 8.7%
11. Ohio – 8.7%
12. Indiana – 8.5%
13. Michigan – 8.4%
14. New Jersey – 8.4%
15. Florida – 8.0%
16. North Carolina – 8.0%
17. Delaware – 8.0%
18. Washington – 7.9%
19. South Carolina – 7.9%
20. Pennsylvania – 7.8%
21. Texas – 7.8%
22. Missouri – 7.6%
23. Kentucky – 7.5%
24. Massachusetts – 7.4%
25. New York – 7.4%
26. Illinois – 7.2%
27. Oklahoma – 7.0%
28. Maine – 6.9%
29. Connecticut – 6.9%
30. California – 6.9%
31. District of Columbia – 6.6%
32. New Hampshire – 6.6%
33. Arizona – 6.6%

As of today, Arizona is the most improved state over the last two years. Back in February 2010, Arizona ranked 4th and had a delinquency rate of 12.4%. As you can see above, though, today that number is down to 6.6%.

After years of hearing Arizona called the Top Foreclosure State and the State with the Highest Foreclosure Rate, it’s actually nice to see Arizona ranked so low on a list. Because, in this game, like in golf, the lowest score wins!

Source: The Cromford Report

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About Doug Hill

Doug Hill is an Associate Broker with Coldwell Banker Residential Brokerage, and founded The Hill Group with his wife, Kirsten in 2003. Combined, they have helped over 1,000+ clients buy and sell homes in the Phoenix Metropolitan Area. Doug holds a Bachelor's Degree in Business Management & Economics, and is a Navy veteran. He is an active member of the Southeast Valley Regional Association of Realtors on their Professional Standards Board, and he and his wife have had the #1 team for Coldwell Banker in Arizona for multiple years in a row. He loves to read, travel, and spend time with his family and friends.
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