The good news is that the shadow inventory has finally dropped.
The bad news is that it will still take nearly 4 years to clear.
A news report by CNN Money today indicated that the shadow inventory - the number of homes that are delinquent on their loan payments, or already in some stage of foreclosure - has dropped from the 52 month inventory of earlier this year down to 47 months.
But 47 months still means nearly 4 years for that shadow inventory to clear. As long as there are homes being released on to the market at distressed-sale prices - and there an estimated 4 to 5 million homes currently in the shadow inventory - home prices are unlikely to recover.
Although, as reported in the HousingWire today, foreclosure starts have decreased for the second quarter of 2011 (both compared to the first quarter of the year, and to the same period last year), the number of mortgage delinquencies actually rose this past quarter.
This drop in forecast shadow inventory is a good sign - but only that the bottom of the market may be approaching, not that we are there yet. Forecasts from earlier this month suggest that home prices may still drop by 4 to 5% before the middle of next year.
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