Foreclosed Home Shadow Inventory…. what does that mean?

What are the experts referring to when they mention the “shadow foreclosure inventory?” This term is referring to the inventory of already foreclosed homes that have not yet entered the market yet. These are the homes that bank and corporate owners have not yet put up for sale and those that aren’t even in the process of being readied for the market. As of the beginning of December, some real estate reporting agencies have reported shadow foreclosure inventories of nearly 30% of total bank owned properties. That’s twice the level of reported numbers last year at this time. What is further noteworthy is that reports regarding homes that have not yet even been foreclosed on are indicating up to 30% of homeowners that are 6 or more payments behind have not even had foreclosure proceedings initiated on their homes. This statistic has more than doubled since last year. The commonly attributed causes for this increase in un-foreclosed properties is that more and more banks are waiting to attempt some type of modification or successfully sell via short sale. The major issue that loan modifications are running up against is the fact that most banks will not reduce the principal owed. Typically, they agree to a temporary MAJOR reduction in interest, which effectively drops the payment significantly. But it is sickening for owners to hang onto a property when the value is far far less than the amount owed. Some reports are indicating a 50% default on the loans that are successfully modified.

Buyers…. All arrows continue to point to continued foreclosed home opportunities and a prolonged market dominance of short sale listings. So learn the basics of dealing with both in order to prepare yourself for a deal opportunity. In the San Diego Condo and Home market, this holds true. The local listings are flooded with short sales and the foreclosure opportunities continue to trickle in. Having a savvy agent is also key…. As in any challenging market. Yes. There’s tons of opportunity as a buyer right now… but I will be the first to tell you, be readied for the challenge!!

One Response to “Foreclosed Home Shadow Inventory…. what does that mean?”

1. Bennie Adle says:

   January 8, 2010 at 2:46 pm

   Hello – just a quick note to say thank you for this article. Very interesting.