Guest Editorial addressing shadow inventory

A Brief Introduction to the Shadow Inventory

By Sarah Parr       ( contact:  sarah@floridaforeclosedlawyer.com)

A report by CoreLogic shows that the shadow inventory of homes in the United States, with 2.2 million housing units, decreased 28 percent in three years. The number of seriously delinquent homes, properties in foreclosure and homes held as REOs (real estate-owned) by mortgage servicers, but not yet listed on multiple listing services (MLS) were used by CoreLogic to determine the shadow inventory figure.

The shadow inventory

The U.S.’s shadow inventory comprises of a variety of homes not featured on the market. Half of the shadow inventory consists of vacant properties in some phase of foreclosure, also known as “zombie foreclosures.” Many homeowners vacate homes when they can no longer afford to pay their mortgage and anticipate foreclosure. Another part of the shadow inventory consists of the homes held by banks, but not up for sale yet, and homes that owners are holding off putting on the market.

The source

RealtyTRAC reports that the source of the large shadow inventory was caused by the finalization of the National Mortgage Settlement in April illustrated by a 59 percent jump in properties in some stage of foreclosure. The settlement invigorated pending foreclosure cases, as banks re-filed or were required to work with homeowners on alternatives to foreclosure, keeping their homes off the market. As Longwood foreclosure attorneys will tell you, shadow inventory mainly grew in judicial-process states since these states are prone to a buildup of foreclosure cases.

The consequences and the silver lining

Real estate market analysts feared that a simultaneous release of shadow inventory properties would greatly reduce prices. On the other hand, the shadow inventory properties have been slowly listed, and the smaller inventory has led to an increase in prices in some communities, Reuters reported. Single investors and investment firms have also tapered possible flooding of the market by purchasing large quantities of these homes when they are first listed, according to TIME.

The existence of shadow inventory creates uncertainty for homeowners looking to sell their homes and for predicting when a local housing market can expect full recovery. Shadow inventory can also cause housing data to underestimate the amount of inventory in the market. Nevertheless, there is a silver lining: consumers can expect a steady flow of inventory becoming available, especially in Florida, because of the large amount of shadow inventory. Presently, Florida has approximately 16 percent of the nation’s shadow inventory. Once a portion of these properties go through the long judicial-foreclosure process, Florida can count on a solid increase in housing inventory. Lawmakers are looking to remedy Florida’s long foreclosure process as well. The housing market will benefit greatly from a measured increase in supply for those eager to buy.

My Blog is always open for guest editorials like Sarah's which offer great information which benefits and educates us about the housing market.