Real Estate Shadow Inventory, Truth or Fiction and if True, Just How Much Is Out There

 
Who knows what evil lurks in the hearts of men? The Shadow knows! Any of us old timers remember well this oft quoted phrase by  Lamont Cranston, The Shadow.

“The Shadow is a collection of serialized dramas, originally in pulp magazines, then on 1930s radio and then in a wide variety of media, that follow the exploits of the title character, a crime-fighting vigilante with psychic powers.” (from Wikipedia)

So what does this have to do with Real Estate? Easy; the question of  of how much shadow inventory is out there and what impact it will have on future home sales is probably the story with the most print coverage lately. Just recently I have seen four articles in the blogs I read about shadow inventory and it impact on it continuing to prolong the housing slump and continuing to effect housing prices. By all accounts, and if one accepts the best forecast to a resolution to this, the “Shadow” will be around as the mystic being for at least 12 months.

The Los Angeles Times just did another extensive article by Alejandro Lazo, ‘Shadow inventory’ of 1.8 million homes could prolong housing slump. Here are a few excerpts from the article.

The glut of troubled homes not yet on the market represents a nine-month supply at the current sales pace. That’s in addition to 3.49 million previously owned homes already on the market.
In California, an estimated 16.8 months’ worth of shadow inventory hung over the market, up from 15.3 months in January 2010, according to CoreLogic.

Shadow inventory, as defined by CoreLogic, is property that is in foreclosure, has a loan 90 days past due or has been taken back by a lender and is not yet listed for sale.

Here is the CoreLogic article referred to in the LA Times article, Shadow Inventory Declines Slightly. Here is a revealing graph from the article:

So what does this mean to you and I? Unfortunately, I feel it means we have to hang on a little longer to the lifeboat we are all in. I wish I could be a bit more optimistic, but I truly feel this just confirms my ongoing opinion that it will not be till the end of 2012 when we finally really see the light at the end of the tunnel. Hopefully by then this shadow inventory will have worked its way through the market and real estate prices will have reached an true bottom from all that has happened. Hopefully the big debacles like Bank of America’s purchase of Countrywide will have resolved themselves along with the bank’s treat to separate all their bad loans into a new BIG BAD LOAN COMPANY who’s underwater inventory of homes will be dumped upon someone, guess who. This is another story I will deal with in the future.

Till then, keep the faith for there are many of us in this business who are trying to help their clients get through this. My latest sad example is a client who purchased a wonderful 1865 totally restored home in Napa for $1,150,000 in April 2006. We are currently in escrow for less than the asking price of $795,000.

Thank you for reading this post. If I can ever be of help in finding you the perfect property here in the Napa Valley, please email me at Curtis@NapaValleyAddress.com. 

Your Broker Extraordinaire, selling Napa Valley Real Estate from its heart, Yountville.