Shadow House Inventory - How does it affect us all ?

Homeowners who have defaulted on their mortgages may have received somewhat of a break during the last year, as most lenders had to stall foreclosures due to a sizable backlog of these properties. Now, some of these homeowners may need to be prepared to undergo the foreclosure process, as some 1.6 million properties begin to enter the market.

Real estate observers have known about this "shadow inventory" for some time, which is what has caused many to couch any optimism about a housing recovery with the reminder that foreclosures are likely to pick up this year.

So just what is "Shadown Inventory?" ....Shadow inventory is not easily defined. It has different definitions depending on who is making the definition. Standard and Poor’s defines it as “outstanding properties whose borrowers are 90 days or more delinquent; properties currently or recently in foreclosure; and properties that are owned by the lender but have not yet been resold, or REO.” Simply put, these are homes that are about to be in foreclosure, in foreclosure, or just foreclosed but not yet resold.

"The low foreclosure numbers in the first quarter are not an indication that the massive reservoir of distressed properties built up over the past few years has somehow miraculously evaporated," RealtyTrac CEO Brandon Moore told Real Estate Economy Watch. "There are hairline cracks in the dam, evident in the sizable foreclosure activity increases in judicial foreclosure states over the past several months, along with an increase in foreclosure starts."

In Utah, foreclosures ranked ninth in the nation through the first quarter of 2012, with one in every 198 properties going through that process. Throughout most of the last few years, Utah has been near the top of the list of states with the highest number of foreclosures, despite its strong economy and employment numbers.