Shadow Inventory

If you are watching business news, you have heard the term “shadow inventory” being tossed around. You should know what this means, as this will eventually play a role in determining property value.  It is the inventory of homes “to be”, but not yet released to the market. Today this includes a huge number or foreclosures and short sale properties. See discussions page on Shadow Inventory for data and numbers.

Shadow Inventory is a concept you need to understand when selling in today’s market. As much as we don’t want foreclosures (aka REO property) and short sales to affect our property values, they do. Here are some statistics you need to know:

·         National Association of Realtors has reported over 30% of homes sold in the last few months have been “distressed properties”.

·         Seriously delinquent properties are counted in the distressed sales shadow inventory. Studies show that 98% of all those who fall 90 days behind never catch up and end in foreclosure or short sale.

·         Banks currently hold about 1M in REO’s and roughly 30% of that has made it to the market to date.

·         REO’s and short sales hit all classes of people and loans (Morgan Stanley study):

o   26.3% are subprime loans

o   56.2% are prime mortgages

When you go to sell your home, ask the agent about shadow inventory and foreclosures in your community. Ask to see all the homes currently for sale in your neighborhood and look at the price points.  Are there foreclosures / short sales? Are you going to be compellingly priced against that dynamic?  Everyone wants to sell their home for as much as “they” think it is worth. Please understand that sometimes reality and our beliefs do not coincide.

IT IS THE AGENT’S JOB TO SELL YOUR HOUSE, FOR THE MOST MONEY THEY CAN (GIVEN CURRENT MARKET CONDITIONS) IN THE MOST EXPEDITIOUS TIME POSSIBLE .  THEIR JOB IS NOT TO TELL YOU WHAT YOU WANT TO HEAR AND GET FREE ADVERTISING BY PUTTING A SIGN IN YOUR YARD FOR 6 MONTHS.

If you follow this page, I have armed you with enough knowledge to know when someone is blowing smoke. If you don’t call me to help, make sure you are dealing with a knowledgeable agent. They are out there and necessary in today’s market.