By Sarah Parr
Recent statistics portray a positive picture for the real estate industry and consumer economy. A recent Corelogic report
shows that the shadow inventory of homes has decreased 28 percent from
when it peaked in 2010. As of early this year, the shadow inventory
comprises approximately 2.2 million housing units, or in real estate
terms, nine months of supply. CoreLogic calculated the number of very
delinquent homes, properties in foreclosure and homes held as REOs (real
estate-owned) by mortgage servicers, but are not yet listed on multiple
listing services (MLS) to determine the shadow inventory figure.
The shadow inventory
The
shadow inventory can refer to all of the homes held by banks, but not
offered for sale, and homes that people are waiting to put on the market
because they are expecting better prices in the future. The shadow
inventory also consists of vacant “zombie foreclosures.” A lot of
homeowners anticipate foreclosure and then move out of their house,
leaving it vacant for a period of time while the mortgage lender
contemplates foreclosure.
How it’s created
RealtyTRAC
states that the finalization of the National Mortgage Settlement in
April 2012 contributed to the growth of the shadow inventory because of a
59 percent spike in properties in some stage of foreclosure. Under the
settlement, banks and lenders have been obliged to work with homeowners
on loan modifications, preventing foreclosure and keeping these homes
off the market. The states in which the shadow inventory grew are mostly
judicial process states, and as Pine Hills, FL foreclosure lawyers will tell you, they are more prone to having a buildup of lengthy foreclosure cases in their courts.
Its impact on real estate
Experts
in the real estate field initially feared properties in the shadow
inventory would be listed simultaneously, leading to a decrease in
property values in certain communities. According to Reuters, though, properties in the shadow inventory
have been listed in small batches, and the low inventory has actually
caused an increase in prices in some areas. Investment firms have also
helped diminish potential flooding of the market by purchasing some of
the shadow inventory, according to a TIME article.
Investors buy out distressed real estate when it first hits the market.
They often beat individual buyers with cash offers, sometimes before
properties are listed.
Even
so, a shadow inventory can create uncertainty both for homeowners
looking to sell and for predicting when a specific local housing market
can expect full recovery. The shadow inventory can also skew housing
inventory data.
Sarah Parr is a Central Florida-based writer who blogs about foreclosure issues.
Sarah Parr is a Central Florida-based writer who blogs about foreclosure issues.
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| Shadow Inventory down 28% from '10 |
