The shadow inventory has been a topic of interest with almost every agent I talk to lately. Most believe it is large and few understand why it isn’t in the marketplace rather than held by the banks. Russell Shaw recently wrote about the shadow inventory being gibberish. It is an interesting article and one I recommend reading.
I rarely disagree with Mr. Shaw, and rather than do so now I’ll simply suggest that we are talking past one another. As I read it, he is suggesting that this inventory doesn’t exist because it is, for the most part, out there already; just not listed as REO. He makes it quite clear, however, that he is not talking about foreclosures still to come. (Apologies to Russell for over-simplifying.) This is where we begin to part ways. I submit that the shadow inventory must necessarily include not only actual REOs (or REOs not listed as REOs), but the entire picture.
More to the point, if we look at all the homes that have been foreclosed on, are in foreclosure and should be in foreclosure, we are left scratching our heads and find ourselves back to the same question: why aren’t the banks taking these homes in, putting them on the market, and selling them? (I’m talking here especially about those homes where people have stopped making their payments and continue to live for 6, 12, even more months.)
MORTGAGES IN DEFAULT
Here’s a graph courtesy of the New York Times:
Sources: Federal Reserve Board and Mortgage Bankers Association, via Haver Analytics
That is an awful lot of mortgages in foreclosure; but add to that that lower line – of mortgages in default and not yet in foreclosure – and the numbers are staggering (again, think of people staying on a year after they’ve stopped making payments). So no matter what we call it, the question remains: What are the banks doing? Why aren’t these mortgages foreclosed? Why isn’t this inventory on the market?
I know all real estate is local and there are plenty of areas around this country where the last thing agents want Read more