A steady decline has been occurring in shadow inventory, which are those properties with serious mortgage delinquency or in some stage of the foreclosure process. Shadow inventory now makes up just 4.5 percent of all mortgages, down from almost 10 percent a few years ago, according to National Association of REALTORS® data. In a look at foreclosure starts, the figure is 0.46 percent – which is essentially back to normal, NAR states.
Read more: Emerging From the Shadows
"Due to the thinning out of the shadow as well as from rising home values, the share of distressed property sales is now hitting the single-digit percentage," writes Lawrence Yun, NAR's chief economist, at NAR's Economists' Outlook blog. "This means, home prices will strengthen (since there will be fewer deeply discounted properties). It also means that those practitioners who specialize in foreclosures or short-sales need to start thinking about a change in business models to normal home buyers and normal positive-equity home sellers."
However, for some states – like New Jersey and New York – who are still facing a large number of shadow inventories, they can expect home prices to rise slowly due to the glut, according to NAR.
Source: "Disappearing Shadow Inventory," National Association of REALTORS® Economists' Outlook blog (April 24, 2015)