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Month’s Shadow Inventory: State by State

March 31, 2011

Earlier this week, we reported on the National Association of Realtors’ (NAR) Economists’ Outlook and gave you a map showing the percentage of overall sales that distressed properties represented in each state. Today we want to show you another map from the same NAR outlook. This one shows the number of months shadow inventory by state:

NAR explained their methodology:

The map shows the number of months it would take to clear the shadow inventory by state. The months’ supply is estimated by dividing the shadow inventory and the monthly number of distressed sales. The numbers range broadly from 51 months in New Jersey to 7 months in Nevada. When looking at months’ supply it is important to keep in mind that this estimate highly depends on saturation of distressed sales. Given that New Jersey over the past year on average reported about 20 percent of existing home sales to be distressed sales, it will take a longer period for the shadow inventory to clear. In contrast, Nevada’s distressed sales averaged a considerable 70 percent share of the existing sales and at that rate the current shadow inventory would clear in 7 months.

Bottom Line

Appreciation of residential real estate will not take place until a region works their way through the shadow inventory that exists. This map gives you an indication of when that will occur in your state. In Wisconsin, we have just over a year until we will see signs of appreciation.

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