Do YOU Know what Shadow Inventory is?

Most people who pay any sort of attention to the news and to the housing market have head about SHADOW INVENTORY.

But do you know what SHADOW INVENTORY is?

Many are confused about what it actually is, and how much there is.

SHADOW INVENTORY – what is it?

 There are 3 components:

  • Houses that are 90 days delinquent but not yet in foreclosure. Since stats, and history, show about 97% of these never catch up and end up in foreclosure, this is a big chunk.
  • Houses in the foreclosure process but not completed (did you know some states, the judicial ones like New Jersey and New York, can take far longer to complete a foreclosure than non-judicial states like California?).
  • Houses owned by the banks but not ready for sale or released to the market

All 50 states have shadow inventory of some sort, and some states have been doing a better job of clearing it out, like California and Arizona who have had a lot of REOs (foreclosures) hitting the market over the last few years. [see infographic from NAR Research].

Some areas within certain states may be better off than others. Others are in trouble, in particular those judicial states like NY and NJ where the foreclosure process is VERY lengthy because of the court involvement.

On a national level, considering the VISIBLE inventory, the available housing levels are getting closer to what may be considered a “normal or balanced market” typically considered  5 to 7 months of inventory.

But this does not take into account the shadow inventory which in some states is significant. And visible and shadow inventories no doubt vary from local market to local market.

 So what does this mean for the housing market, and prices????