Shedding Light on Shadow Inventory
The term shadow inventory has become quite a buzz word over the past couple years, representing all that is uncertain and scary in this housing market. But shedding light on that shadow inventory is what is needed to face the true scope of the problem and remove all the uncertainty surrounding it. I was honored to help shed a little light on shadow inventory in the March 2012 issue of Cityscape, a journal of policy development and research published by the U.S. Department of Housing & Urban Development (HUD).
The article I wrote, titled Chasing Shadow Inventory: Sloppy Foreclosures and Unintended Consequences, was part of a new feature in the publication called Point of Contention, in which several experts provide their viewpoint on a specific issue. Other viewpoints on the shadow inventory issue came from Mark Fleming, chief economist at CoreLogic, and Eric Rosenblatt and Vincent Yao of Fannie Mae
Generally speaking, shadow inventory refers to properties that likely should be listed for sale, but for different reasons are not listed for sale. The majority of this shadow inventory is made up of distressed properties, including delinquencies, properties in the foreclosure process and properties that have completed the foreclosure process but have not yet been listed for sale by the foreclosing lender. This last segment is also known as bank-owned, or REO. RealtyTrac seen a decline in the inventory of those last two segments over the past year and a half, as illustrated in the graphic below. That's good news, although we are expecting a short-term increase in that inventory in 2012 as banks push through some of the delayed foreclosures caused by paperwork and processing problems triggered by the robo-signing controversy.