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Falling Default Rate a Silver Lining for Housing

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NEW YORK (TheStreet) -- The latest data points on housing have shown signs of a slowdown, but one metric of the housing recovery that continues to improve is the foreclosure rate.

There were 48,000 completed foreclosures in August, down 34% from 72,000 a year earlier, according to the latest report from CoreLogic. This is still elevated. Prior to the decline in housing, completed foreclosures averaged 21,000 a month nationwide between 2000 and 2006.

Since the crisis, about 4.5 million homes have been lost to foreclosure.

Still, the housing market is slowly putting the foreclosure crisis behind it. As of August, there were 939,000 homes in some stage of foreclosure, down 33% from 1.4 million a year earlier.

The foreclosure inventory as of August 2013 represented 2.4% of all homes with a mortgage compared to 3.3% a year earlier.

Approximately 2.1 million mortgages or 5.3% of all mortgages were seriously delinquent -- 90 or more days past due - or in some stage of foreclosure in August. That is the lowest level since December 2008.

The declining trend in foreclosures is good news because foreclosures depress housing prices. Analysts have long worried that the so-called "shadow inventory," foreclosed homes that are yet to hit the market, would create a glut, hurting chances of a recovery.

At the peak in 2010, the shadow inventory was an estimated 3 million homes. But as of July 2013, shadow inventory was down to 1.9 million homes, accounting for a value of $293 billion, representing about 3.7 months of supply.

CoreLogic estimates the current stock of properties in the shadow inventory, also known as pending supply, by calculating the number of properties that are seriously delinquent, in foreclosure or held as REO by mortgage servicers, but not currently listed on multiple listing services. Properties that are not yet delinquent but may become delinquent in the future are not included in the estimate of the current shadow inventory.

Over the past year, the value of the U.S. shadow inventory dropped by $87 billion -- a sign of increased normalcy in the housing market," said Anand Nallathambi, president and CEO of CoreLogic. "With a year-over-year decrease of 22 percent in July, the shadow inventory has now declined steadily for 10 consecutive months."