The Shadow Inventory report released Jan. 2 by real estate analytics firm CoreLogic showed that residential shadow inventory totaled 2.3 million units in October 2012, accounting for 85 percent of the 2.7 million properties seriously delinquent, in foreclosure or real estate owned.

This number was down from October 2011 when shadow inventory totaled 2.6 million units.

CoreLogic reported that 1.04 million of the 2.3 million properties included in the October 2012 shadow inventory were seriously delinquent, 903,000 were in some stage of foreclosure and 354,000 were REO properties.

The study revealed that during the three months ending in October 2012, Arizona saw a 13.3 percent drop in serious delinquencies — the steepest decline in the nation. Coming in second was California, down 9.7 percent. Michigan and Colorado tied for third with a 6.8 percent decline in serious delinquencies. Wyoming rounded out the top five with a 5.9 percent drop.

Anand Nallathambi, CoreLogic president and CEO, said in a news release that he expects a “gradual and progressive contraction in the shadow inventory in 2013 as investors continue to snap up foreclosed and REO properties and the broader recovery in housing market fundamentals takes hold.”

Mark Fleming, CoreLogic chief economist, noted that nearly 50 percent of the properties in the current shadow inventory are delinquent and not yet foreclosed.

“Given the long foreclosure timelines in many states, the current shadow inventory stock represents little immediate threat to a significant swing in housing market supply,” Fleming said in a news release. “Investor demand will help to absorb the already foreclosed and REO properties in the shadow inventory in 2013.”

The study found that Florida, California, Illinois, New York and New Jersey account for 45 percent of the 2.7 million properties that are seriously delinquent, in foreclosure or REO. CoreLogic reported that in October 2011 these same states made up 51.3 percent of all the distressed mortgages that were at least 90 days delinquent, in foreclosure or REO.

Read the October 2012 Shadow Inventory Report.