Add 2.1 million houses to the glut

By Les Christie, staff writerNovember 22, 2010: 10:47 AM ET

NEW YORK (CNNMoney.com) -- There's a large number of homes, either already repossessed by lenders or very seriously delinquent, that are poised to be added to the already glutted regular supply of homes on the market.

This "shadow inventory" jumped 10% during the past year, to an eight-month supply at the current rate of home sales, according to a report issued Monday.

According to CoreLogic, a financial information provider, there were 2.1 million homes in this uncounted inventory as of the end of August, up from 1.9 million units 12 months earlier.

Adding the shadow inventory to the visible supply of homes on the market boosted the total housing-market supply to 6.3 million units from 6.1 million in August 2009. At the current sales rate, it would take 23 months to go through the entire visible and shadow inventory of homes -- more than three times the normal rate of six to seven months.

The potential extra supply raises the risk of further home price declines, according to Mark Fleming, CoreLogic's chief economist.

"[Weak demand] is being exacerbated by a significant and growing shadow inventory that is likely to persist for some time," he said.

The shadow inventory has been growing as banks take a long time to process defaults.

Many banks have been slowing the foreclosure process because they already own a glut of homes, according to Rick Sharga, spokesman for RealtyTrac, the online marketer of foreclosed properties.

He said the banks are "managing" their inventory and not pushing delinquent borrowers quickly through the foreclosure pipeline so they don't have to repossess homes that will take a long time to sell.

It's better for the banks to allow borrowers to stay in these homes, doing the maintenance and protecting them from vandalism, than leaving them vacant for months in moribund markets.

The recent "robo-signing" scandal has further lengthened the foreclosure process. Several servicers temporarily froze foreclosure actions amid questions about whether many of the foreclosure documents were signed without proper review, raising questions about the procedure's validity.

Florida, Michigan, and California have the highest ratios of properties 90 days or more late compared with home sales. Texas has the lowest ratio of distressed properties to sales. 

#cnnfb_connect {background-color:#f5f5f5;width:auto;height:auto;padding:10px;clear:both;} First Published: November 22, 2010: 9:58 AM ETRight Now

Malls and discounters see big crowds as shoppers scoop up bargains to kickstart the holiday season. Flagship retail store in Times Square draws customers from around the world for its 10 p.m. Thanksgiving open. Holiday shopping: This year we did the legwork for you, asking business bigwigs to share their best gift picks. 

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A look inside Macy's studio where the iconic floats and balloons get ready for their march down Broadway on Thanksgiving day. Harlem Children's Zone president Geoffrey Canada says hiring better teachers and extending the school year will fix public education in our cities. Joanna Cruz and Tangela Fedrick receive food stamps while job training in a kitchen in Philadelphia. 

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Crowd-control methods learned after a 2008 tragedy appear to work.

Preliminary reports of Black Friday sales are starting to come in. The verdict so far: The crowds were bigger and people walked away with arms full of goodies, but shoppers spent only modestly more this year.

For consumers who haven't had their fill of Black Friday deals, online merchants will serve up another round of deep discounts, free shipping and other gimmicks on Monday.

Small businesses in a New Jersey town don't get doorbuster crowds on Black Friday, but this year's holiday shopping season should be better than last year's

No matter how diligently you plan for your post-career life, surprises can still trip you up.

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