What's the Scoop with the Shadow Inventory?

I was asked this morning what I think about what is going on with the “shadow inventory” (the homes that lenders have foreclosed on but have not yet gone on the market). Lenders are continuing to foreclose on homes at almost record rates, yet the number of Bank Owned (REO) listings entering the market does not reflect that.


According to the Wall Street Journal in April this year : "As of March, banks had an inventory of about 1.1 million foreclosed homes, up 20% from a year earlier, according to estimates from LPS Applied Analytics. Another 4.8 million mortgage holders were at least 60 days behind on their payments or in the foreclosure process, meaning their homes were well on their way to the inventory pile. That “shadow inventory” was up 30% from a year earlier."
http://blogs.wsj.com/economics/2010/04/24/number-of-the-week-103-months-to-clear-housing-inventory/


My best guess is that a) Lenders are hanging on to properties so as not to flood the market, lowering the average sales prices and thereby lowering the value of their inventory and/or b) Lenders are simply overwhelmed by the volume and don’t have their systems & staffing up to speed to deal with it. Yet.


In the Denver area recently, REO (Bank Owned) listings that are in fair to good condition go under contract within 30 days (often faster) and sell for asking price or above asking price.


So… we wait and see what happens next.

Lillian Lively http://llively.yourcastle.org/ Lil@TopProducer.com