12 Jun What is the Shadow Inventory and should we fear it?

Shadow inventory, the very mention of it brings fear to Realtors, Brokers, Mortgage Officers and Homesellers!  The term Shadow Inventory is used to describe the large volume of homes, currently foreclosed and held by banks, just waiting to hit the market.

Some fear the Shadow Inventory will strike another crippling blow to our fragile Housing Market and cause prices to further decline.

Should we fear the Shadow Inventory?

To understand the Shadow Inventory we need to know the statistics behind the word.  Realtytrac describes itself as the publisher of the largest database of Foreclosures, Auction and Bank Owned homes in the country for investors and homebuyers on their website.  They track and publish data about the number of foreclosures in process and predictions about the number of foreclosures yet to come.

During 2011, the news of foreclosures being processed incorrectly, or Robo Signing, caused many banks to slow down their foreclosure filings and processes.  The number of foreclosures sold in 2011 was significantly less than in 2010.  There are many homes sitting empty, already foreclosed and not listed for sale yet.  In some neighborhoods this problem is severe and creating blight and dangerous conditions.

As an Agent Selling South of the River homes, I don’t see a strong concentration of properties sitting empty, or lurking out there as shadow inventory. My opinion is this: There is a large inventory of homes across the country which will be brought to the marketplace.  For us, in Lakeville, Apple Valley, Prior Lake, Savage, Eagan, Burnsville, Farmington and Rosemount Minnesota, the upcoming foreclosure inventory will not be concentrated enough or numerous enough to cause any significant price decreases or downward trends.

We have so many multiple offers on the current bank owned homes, our marketplace could absorb more foreclosures without stagnating or stalling.  I am confident we will not see plumeting prices in our local area due to upcoming shadow inventory.

This doesn’t mean I believe we are completely out of the woods yet, I don’t think we will see substantial price increases soon.  However, the local, South of the River area should not have to worry much about a crushing amount of foreclosures sweeping onto the market and sending us backward in values.

As always, if you have any specific questions, give me a call at 612-889-6496 or email me.  I’m always happy to hear from you.

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