Us shadow inventory shrinks by 1.2 million

America reduced its shadow inventory by 1.2 million in the first half of 2012, according to JPMortgan Chase.

Almost 335,000 short sales of foreclosed properties were completed in the first six months of the year, an achievement boosted by the $25 billion foreclosure settlement agreed in March.

The news will be welcomed by homeowners and agents alike, as America's property market must clear its backlog of foreclosures until the housing market can fully recover. Indeed, the strong progress could continue for the rest of 2012, according to JPMorganChase, who predict that the number of homes sold "could double", taking the figure even further lower from the 2010 peak of 6 million.

This is still just a small step in the process, however. "More than 4 million loans and properties would remain," adds Housing Wire.

As banks make progress and house prices increase, the number of borrowers who owe more than their home is worth is expected to fall. Indeed, should property values rise another 10 per cent, the 10.8 million underwater borrowers could drop to 9 million, estimates Chase.

"Although re-defaults and new delinquencies will continue to keep shadow inventory elevated, the rapid decline should prevent downward pressure on home prices going into 2013," commented analysts. "Combined with better existing home sales, investors have reason to be optimistic about running recovery scenarios."