Shadow Inventory - Real or Myth?

There’s been a lot of talk about the “shadow inventory” of homes coming to the market, referring to the foreclosures that the banks have yet to come and those bank-owned properties that are being held back.

According to Standard & Poor’s U.S. Residential Performance Index, “The shadow inventory of unresolved distressed properties is currently at an estimated $405 billion, representation of four years of housing inventory and one-third of the outstanding U.S. non-agency residential mortgage debt.”

Those numbers are significant, and I don't doubt that they are accurate--but they are national numbers. Real Estate is all about location, location, location--we all know that. Even within Contra Costa County, the foreclosure statistics vary dramatically from one town to another.

I recently attended an event where the speaker was Robert Kleinhenz, PhD, Chief Economist for the California Association of Realtors. He discussed the economy—as a nation, as a state, and how it affects us locally here in the San Ramon Valley with respect to our housing market in particular.

Kleinhenz said the recession is “over” but our recovery is slow. Very slow, so that you may not have noticed it.

He predicts that 2012 will be much the same as 2011, as far as the real estate market is concerned. We will sell the same number of homes, or maybe a few more; the sales prices will be about the same, or maybe a bit less.

Consider that the bottom of the real estate market for the nation was February 2011—yet for California it was February 2009. We hear so much national news—it’s important to realize that the California is ahead on the recovery process.

And while foreclosures will certainly continue to be part of the picture in 2012, Kleinhenz doesn’t think the fear of a shadow inventory is justified. He stated that there are currently 105,000 homes showing up on the www.foreclosureradar.com site (across the state). Consider that many of these homes are in pre-foreclosure (which is an average 320 day cycle), and once they become bank-owned it’s an average of 273 days until re-sale.

In looking at the number for Contra Costa County, Kleinhenz believes the foreclosure inventory can be absorbed without adverse affect on our market.

Specifically in the San Ramon Valley, the following stats are found in Foreclosure Radar:

-      In San Ramon: there are 187 homes in pre-forclosure, 158 have been scheduled for foreclosure auction, and 70 homes are currently bank-owned.

-      In Danville: there are 105 homes in pre-foreclosure, 122 have been scheduled for foreclosure auction, and 29 homes are currently bank-owned.

-      In Alamo: there are 26 homes in pre-foreclosure, 41 have been scheduled for foreclosure auction, and 10 homes are currently bank-owned.

Foreclosure Radar is a fascinating site, but requires a subscription. If you don’t have one, you can access mine via my website: www.lauren4homes.com, then the foreclosure tab.