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How Much 'Shadow Inventory' Is There?

The National Association of REALTORS has put together a video discussing the amount and type of  ‘Shadow Inventory’ nationally.  The biggest problem with such figures is that they are still based off of sampling & definitions of what is or is not counted in the definition.  Regardless of what the actual number is, the video discusses how banks are putting more focus on short sales than they have in the past – which I believe to be a much better option than letting these properties go through the entire foreclosure process.

Also of note is the reiteration that banks are not going to just dump huge amounts of new inventory on the market – they understand that this is not in their interest and to be honest, they can’t process this stuff fast enough to dump a huge number of new foreclosures on the market – the foreclosure process is a long one and each can take a little different timeline so by their very nature they are likely to come on in a staggerd fashion.

I still do not subscribe to the idea that there will be some huge “wave” of foreclosures coming, but rather that we will continue to see the high levels of activity that we have seen since 2008.

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10 comments
Josh in Nashville
Josh in Nashville

The most recent report from National Asociation of Realtors is that the shadow inventory is roughly 2.4 mil. which possibly could be low in my opinion as there are over 130 mil. households in the country. If this figure is correct it might not be as bad as it sounds as it is only about 2% of the countys properties.

Marcus
Marcus

Thanks for e-mailing me the extra info about looking for a home. Your realty site is great. I appreciate your help. Now I'm another step closer to getting a home.

Ben
Ben

As someone in the TV business, I love your fresh approach to providing video about today's real estate market. It's such a fresh, fun idea. I wish others would consider such an innovative approach. I'm also hoping to learn more about the housing trends in the Twin Cities. I'm definitely bookmarking this site! Can't wait to see more updates from you all.

Apple
Apple

Hi Allan, new subsciber here! Great post on Shadow Inventory, very straight forward and with the video to boot! I hope you write more regarding this topic as I will be checking often for updates on trends. Thanks a lot!

John
John

Thanks for sharing, specially the vid from REALTOR.TV. It was an eye opener and made me think on what to do with regards to investments on homes and real estate. I could check on banks that may offer short sales as well.

Jenna
Jenna

Hi, I'm new here actually I was just doing some research on this topic since I been hearing alot about shadow inventory and foreclosures from my uncles. The discussion on the video is a big help! I learned a lot though I was a bit confused on some terms used. I will stick around and do some more digging. Thanks for this post!

Alan Kroll
Alan Kroll

I think you are right on with the analysis that the banks will not do a big release of their inventory. In Northern Virginia the REO market peaked in inventory in 4Q2008. In that quarter we had an inventory of about 2800 to 3500 REO properties active in the local MLS. Right now we have 400-500 units active in that same market area even though the default rate has increased slightly since that time period. I heard one BofA exec make a statement that we had about 53,000 foreclosed properties in Virginia that were not released to the market. The exec did not make any specific statement about when or if they would be released, but that was three months ago and nothing has happened since. So I would not expect them to release any volume any time soon. Regards, Alan

Alex Cortez
Alex Cortez

Aaron, first of all, great blog. I was browsing online and found it on google. Back to the topic at hand, it's hard to say what percentage of the mind-numbing numbers of mortgages in default will make it through the foreclosure process. Obviously the effectiveness (or lack thereof) of programs like HAMP will come into place. But I, for one, don't foresee long-term appreciation/gains until unemployment numbers decrease significantly (and permanently). Subscribing to your blog.

Brent
Brent

The shadow market will be around for a while since the banks no longer have to follow mark-to-market and take losses as the assets lose value. They can just hold onto them indefinitely to keep the supply of homes on the market low to keep the rest of the homes from depreciating while not taking direct losses (besides maintenance costs). The last thing the bank wants is more strategic defaults from even lower prices. Side note: who would have thought an Enron creation like mark-to-market could go wrong?

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TwinCitiesRealEstateBlog.com is not a Multiple Listing Service MLS, nor does it offer MLS access.
This website is a service of Aaron Dickinson of Edina Realty, a broker Participant of the Regional Multiple Listing Service of Minnesota, Inc.