I agree with everyone below that answered....but, I want to add one little 'twist' to this equation of 'shadow inventory'. There are huge investor groups, pension funds, hedge funds, foreign funds/individuals that are buying houses/condos/real estate in BULK. They are sometimes buying hundreds of homes at a time, all for long-term investment, knowing the market has already turned for the better.
It's happening mostly in the states where the housing meltdown was deepest.
Boca Raton-Miami Beach
Data: Housing inventory has decreased by 49% in Los Angeles and 53% in San Diego this summer, compared to the same period one year ago. This lack of listings is causing bidding wars.
Result: Sellers have received high multiples of bids, 50 or more on a single property, lifting home sales volume and prices in the second quarter (Q2) of 2012. All this action puts sellers in the most competitive position theyâ€™ve held since the dead cat bounce of late 2009 and early 2010 during the tax credit episode, which stimulated a homebuying surge and resulted in momentum driven speculation.
Thus, a huge level of inventory displacement has taken place, but is it that moment of instant, long-term change?
There has been conversation that this shrinkage in the MLS inventory will contribute to a reset of the housing cycle, as rising home prices will result in increased home equityand reduced negative equity across the board. Thus, more homeowners will be able to conventionally sell their homes without them or the mortgage lender taking a loss.''
California Article on lower inventory, higher prices, Shadow
â€Ž10-09-2012 01:13 PM
Are lenders really sitting on a pile of REO properties that it's waiting to do something with? I think not....sure there are homes that are in the pipeline that will continue to exist for a very long time but banks are taking care of their inventory by other means.
First, they are finally accepting the "short sale" process as a viable solution to the distressed home issue. This adjustment has made a serious dent in the forclosure inventory.
Secondly, they are using other creative means by which to erase homes from the distresses market that include selling large blocks of these properties to investor groups. This initiative usually removes these REO destined properties from the distressed property roles before they are foreclosed on.
Additionally, banks are also now using serious means by which to intervene on behalf of the financially distressed home owner. Unfortunate for so many thousands earlier on in the economic melt down, lenders turned their backs on people that were in financial trouble....the results of which we are still dealing with. This new position is also causing a decrease in the now shrinking numbers.
For those that are waiting for this HUGE wave of REO homes resulting from the release of the "shadow inventory" the wait may never result in anything of substance.
I posted a blog about this just a few days ago. According to Corelogic (who tracks REO properties), the shadow inventory is shrinking due to investors buying up properties.
Here is the link to the article:
Prudential Connecticut Realty
"Foreclosure Bulk Sales Program Allows Banks and Hedge Funds to Buy Low After Selling High"
There really isn't much "SHADOW INVENTORY" left out there worth buying unless you want some downtown Detroit dirt which is presently worthless. The fast and furious fix and flip feeding frenzy is history. It's time to create a new shtik. I know I sure have and it's working.