Not too long ago, Mike Orr shared a very helpful list on his website, The Cromford Report. I decided I wanted to share it with you below, because it does a much better job of putting the shadow inventory and the housing crisis into context. Here’s why.

As Mike Orr put it:

“In a state with judicial foreclosure, the lender usually takes far longer to foreclose. This means the number of recorded foreclosures in a given period will be much lower than in a similar state with non-judicial foreclosure. So the number of foreclosures in a month is NOT a good measure of how badly a state is affected by the housing crisis. A much better measure is to determine what percentage of home loans are in some state of delinquency. […] This data tells us a lot about the true “shadow inventory” – loans that in some sort of trouble but have not yet resulted in a public record to confirm that (e.g. Notice of Default, Notice of Trustee Sale, Lis Pendens, etc.). Here are a few of the most recent numbers issued by LPS for the month of February 2012, showing the percentage of first home loans that are delinquent but have NOT received a foreclosure notice.”

Shadow Inventory by State

1. Mississippi – 13.5%
2. Georgia – 10.8%
3. Nevada – 10.5%
4. Alabama – 10.1%
5. Louisiana – 9.7%
6. Tennessee -9.7%
7. Maryland – 9.5%
8. Arkansas – 9.2%
9. West Virginia – 8.9%
10. Rhode Island – 8.7%
11. Ohio – 8.7%
12. Indiana – 8.5%
13. Michigan – 8.4%
14. New Jersey – 8.4%
15. Florida – 8.0%
16. North Carolina – 8.0%
17. Delaware – 8.0%
18. Washington – 7.9%
19. South Carolina – 7.9%
20. Pennsylvania – 7.8%
21. Texas – 7.8%
22. Missouri – 7.6%
23. Kentucky – 7.5%
24. Massachusetts – 7.4%
25. New York – 7.4%
26. Illinois – 7.2%
27. Oklahoma – 7.0%
28. Maine – 6.9%
29. Connecticut – 6.9%
30. California – 6.9%
31. District of Columbia – 6.6%
32. New Hampshire – 6.6%
33. Arizona – 6.6%

As of today, Arizona is the most improved state over the last two years. Back in February 2010, Arizona ranked 4th and had a delinquency rate of 12.4%. As you can see above, though, today that number is down to 6.6%.

After years of hearing Arizona called the Top Foreclosure State and the State with the Highest Foreclosure Rate, it’s actually nice to see Arizona ranked so low on a list. Because, in this game, like in golf, the lowest score wins!

Source: The Cromford Report