'Shadow inventory' of homes tops 2 million, says data aggregator

The "shadow inventory" of homes likely to be repossessed by lenders or already in their real-estate-owned (REO) inventory but not yet on the market reached 2.1 million units in August, up from 1.9 million a year ago, according to the latest analysis by data aggregator CoreLogic.

Because home sales also slowed, the shadow inventory represented eight months of housing supply, up from five months a year ago, CoreLogic said.

Weak demand for housing is "significantly increasing the risk of further price declines in the housing market," said CoreLogic Chief Economist Mark Fleming, who said the problem is exacerbated "by a significant and growing shadow inventory that is likely to persist for some time" because of the time it takes loan servicers to liquidate properties.

Combine the 2.1 million "shadow inventory" with the 4.2 million homes that were on the market in August, and the total supply of unsold homes was 23 months, about double the 11.6 months the National Association of Realtors (NAR) estimated in September.

(CoreLogic estimates the "visible inventory" of 4.2 million homes, which NAR's estimate was based on, represented 15 months of supply.)

A six- to seven-month supply of housing is considered a more normal balance of supply and demand.

CoreLogic estimates shadow inventory — sometimes called pending supply — by calculating the number of properties that are seriously delinquent (90 days or more) or in foreclosure that will, in all probability, end up REO.