The Debate About Shadow Inventory Continues

The Debate About Shadow Inventory Continues

April 2, 2010 Betty Jung

So where are all the listings of houses in foreclosure a.k.a. shadow inventory?

There’s been a lot of debate throughout last year and into 2010 about whether or not there even is shadow inventory, and whether or not it will be coming on the market. Some say if banks were to put that inventory on the market, those properties would only continue to drive prices down, thereby decreasing the bottom line of the banks.

I read this account just the other day as to what shadow inventory actually is or is being defined as:

Definition 1 – Foreclosed but not listed. Some analysts say the “shadow inventory”are the homes which the bank has foreclosed on but not sold. These are homes that are not on the market but owned by the bank (REOs not listed on the market).

Definition 2 – Homes in the foreclosure process as well as delinquent mortgages where foreclosure proceedings are imminent.

Definition 3 – All homes delinquent, short sales not on the market, REOs not on the market, and anything in the foreclosure process.

Definition 4 – All of the above plus modified loans (as they have a large percentage of failing anyway, pay option-arms about to be reset, and lots sitting idle with builders in trouble.

The Wall Street Journal says no one has found a way to track precisely how many of those properties are owned by banks. Yet, HousingPredictor.com says there are still 6 million properties considered part of the “shadow inventory. They also report that in the last three years, over 7 million properties have already been seized by banks in foreclosure. Experts say it will take another 5 years for all the excess shadow inventory, when it hits the market, to be absorbed.

The bottom line is no one really knows what the numbers are or when/if they will come on the market for sale.

Information courtesy of Betty Jung ... http://bettyjung.wordpress.com/