Many of us have heard this phrase used in today’s distressed RE market. What does it mean? Most experts use it referring to the housing inventory that the banks have taken back, but not yet listed or marketed for sale. Some even include the inventory that has an NOD/NOTS filed against it and are beyond the 90 delinquency window, but have not yet been foreclosed on. Why is this relevant? Because these same experts raise concerns that this ‘shadow inventory’ will either flood the market and further-depress values, or slowly trickle it out keeping RE values flat for years to come. Considering the basics of supply and demand, the latter is a likely solution.
The shadow inventory of homes with delinquent mortgages yet to move through the foreclosure process would take 47 months to clear at the current sales rate in the market, according to a newly-published housing finance report from Morgan Stanley.
Another important question to ask about Shadow Inventory is, how many are there? Some experts with RealtyTrac.com believe that only 20% of what has been taken back is actually on the market for sale today. That leaves 80% as Shadow Inventory – WOW!
What does that mean to us? As Sellers, let’s consider this an opportune time to get your listing out. As Buyers, let’s use it as a time to carefully consider each opportunity, as more will be hitting the market over the next few years…
– Jeff Grant, President, ShhortSale.com