What is Shadow Inventory?

On March 31, 2011, in Foreclosures, Uncategorized, by David Monsour

You may hear “shadow inventory” thrown around on CNN and FOX News. It’s a real thing and it’s a real threat to real estate prices.  Shadow inventory is foreclosure inventory held by banks that is not actively listed in the real estate market.  The banks are holding this inventory so that they can time release it into the market to avoid flooding the market with properties driving prices down.  Imagine the downward force on properties if a huge influx of properties was dumped into the market.  It’s simple supply and demand.  There aren’t enough buyers prevent home values from falling now.

The banks are smart enough to know that they need to regulate the number of properties on the market at one time. The bad part about shadow inventory is that as long as there is a backlog of properties home prices will have little hope of increasing.  If housing is to recover it’s going to require prices to recover so that more home owners have equity in their homes.

Comments are closed.