What is Shadow Inventory?

By
Real Estate Broker/Owner with Savvy Home Strategies Realty, LLC-REALTOR®-Estate-Probate B.1000860.LLC

What Exactly is Shadow Inventory in the Las Vegas Real Estate Market?Las Vegas Shadow Inventory

Shadow Inventory has been a HUGE boogeyman in the Las Vegas Real Estate Market.  Experts wring their hands and have been telling us for YEARS how we are just going to get a bunch of Las Vegas REOhomes for sale just dumped on us overnight.

I actually feel bad for those that parrot what they hear on the news and pretend that they know what they are talking about.  Some people’s perception of REO shadow inventory is that banks just sit there and hold on to properties that have already been through the foreclosure process.  This could be further from the truth.  Banks (or servicers to lienholders/investors) DO NOT want to hold on to inventory or assets longer than they have to.

They want to get this stuff off their books & quickly!

There are many things that hold up the process to get them listed by a real estate agent on the free market such as bankruptcy, tenants, unwilling occupants, trash outs and even property rehab.  Once those items are taken care of, the home is listed or sold to investors in bulk packages.

Another way shadow inventory is presented is how many homes are in default or at risk of default.  Unfortunately this is not a good indicator for “the big dump” because many real estate market forces will absorb that inventory:  the homeowner could accept a loan modification, the homeowner could short sale the home successfully or an investor could purchase the home at the trustee sale or foreclosure auction and either rehab and resell or rehab and rent out for a long term hold.

Las Vegas Foreclosures will be around for awhile – I am not doubting that.  The only thing I doubt is that the shadow inventory fairy dumps an abundance of inventory on us one day.  I have been hearing about this for two years, I am sure I will be hearing about it for the next two years.  The only way we will see an abundance of inventory GROW is if all the Las Vegas Buyers decided to leave the building all at once.  Doubtful – but I have been wrong before.

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Thanks,  Renée Burrows 702-580-1783 Broker/Owner, REALTOR®
 

 

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Re-Blogged 5 times:

Re-Blogged By Re-Blogged At
  1. Gene Riemenschneider 01/22/2011 09:01 PM
  2. Jim McCormack 01/24/2011 12:28 PM
  3. Capt. Bob Davies 01/24/2011 01:38 PM
  4. Dave Woodland 01/25/2011 12:24 AM
  5. Kate Reilly Lund 01/26/2011 01:53 PM
Topic:
Real Estate Market Trends
Location:
Nevada Clark County Las Vegas Jake's Ranch
Groups:
BPO agents
Las Vegas Foreclosures - Homes, High-Rises-Condos
Nevada/Las Vegas REO, Fourclosure, Short Sale Specialist
REO
Short Sales Pre Foreclosures Bankruptcy and More!
Tags:
las vegas nv real estate
las vegas foreclosures
las vegas short sales
las vegas reo
las vegas homes for sale

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Show All Comments
Rainmaker
123,362
Karen Pannell
Real Living / Home Realty - Owensboro, KY
Owensboro KY Real Estate -270-903-2167 Homes, Cond

Renee,

The people who have come up with this Shadow Inventory theory must be in charge of the short sales too!  Maybe one day they will all  come on over to the real world with the rest of us!

January 24, 2011 05:55 PM #59
Rainer
104,249
Ric Mills
Keller Williams Southern Az - Tucson, AZ
Integrity, Honesty, and Vast Real Estate Knowledge

Shadow inventory is a big problem and will be for several years in our market also.  the Banks only want to release a little at a time so they don't implode n already bad situation.  In spent 33 years on that side and I undestand what they are dealing with.  It will be with us in certain markets fo a long time. So dig in and work what you can and survive for better times.

January 24, 2011 06:43 PM #60
Rainmaker
706,955
Claude Cross
Claude Cross-Charlotte NC Real Estate(Homes By Cross, Inc.) - Charlotte, NC
Charlotte NC Homes For Sale

Renee - Me and My Shadow are unafraid of the doom that is "deemed" upon us. I am more worried about Polar Bears that Shadow Markets. Perhaps I'll chill out and get ready for the spring market. The spread from Vegas is that we will have a good year. I'm betting on it

January 24, 2011 07:34 PM #61
Rainmaker
51,421
Greg Saunders
RE/MAX Around Atlanta - Atlanta, GA

Renee:

These properties know in the industry as "shadow inventory" may be a proverbial time bomb for the real estate market.  For example, what would happen if all of a sudden these inventories flooded the marketplace.  The disaster would result in further depreciation sparked by the existing glut of foreclosures in the marketplace.  So what is the real logic for the banks holding on to all these distressed properties?

First, and probably the most obvious is that the banks are slow to move this inventory because they would have to reflect the losses on their books.  Having to reflect these loses on their balance sheets would put further stress on the banks.   

Secondarily, banks may be holding inventory to allow for a slower free-fall of prices.  Market recovery may also bring about increasing assets!  Still another variable (as you mentioned) may be that it just takes a good deal of time and money to get a foreclosure cleaned up and ready to be marketed.   

January 24, 2011 08:13 PM #62
Rainmaker
65,094
Brenda & Ron Cunningham
West USA Realty - Phoenix, AZ
Realtors, Homes for Sale - Phoenix Metro

Most of the homes I watch have come on the market, but I do believe that they have inventory that they may have to hold for various reasons. 

January 24, 2011 08:28 PM #63
Rainmaker
426,721
Marcy Moyer
Keller Williams Realty Palo Alto Probate & Trust Specialist - Palo Alto, CA
CDPE

I  don't claim to have an secret knowledge but I agree that it is unlikely all this "shadow" inventory will suddenly come  the market this year.

January 24, 2011 08:45 PM #64
Rainer
26,391
R Grodin
Worland, WY

Will deal with it if and when it should ever happen.

January 24, 2011 10:03 PM #65
Rainmaker
199,913
Woody Edwards
First Choice Realty, Inc - Chesterfield, VA
A Realtor® Who Answers His Phone!

I ask a friend of mine, who happened to be a reporter, why papers and TV only report the "bad" stuff?  His answer was, "Blood Sells!!"  Like it or not, he was right.  Just look to your left or right the next time you are in the checkout line at the grocery.  The rags don't tell the AHHHH stories.....they tell the OHHHHH stories!

January 24, 2011 10:06 PM #66
Rainer
19,193
Federico Astiz
HomeSmart International - Tucson, AZ

I like how you think......good job!

January 24, 2011 11:07 PM #67
Ambassador
1,550,626
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 800-610-7253 DRE01267479 - Costa M

I know many buyers who are hoping to have the "shadow inventory" hit the market and bring down prices.  It hasn't happened yet.

January 24, 2011 11:27 PM #68
Rainmaker
128,113
Mike Henderson
Your complete source for buying HUD homes - Littleton, CO
HUD Home Hub - 303-949-5848

I wonder what will happen first.  Earth being hit by a comet or all the homes coming out on the same day.  It's the boogeyman in the closet.  I work with investors so I deal with this a lot.  Two years ago people were worried about this so they didn't buy.  I could of sold them houses for 80K that rent for $1,200 a month.  Today those homes are now going for 120K.

LOL.  Maybe they'll drop to 80K when the inventory hits.  No freaking way - morons.

January 25, 2011 12:37 AM #69
Rainer
203,980
Eugene Adan
Adan Properties, Carlsbad, CA (760) 720-9710 - Carlsbad, CA
Carlsbad Real Estate

Shack Diva,

You are right!  And, investors are buying bulk from the banks and doling them out at their appointed time.

January 25, 2011 12:49 AM #70
Ambassador
842,768
Dagny Eason
Dagny's Real Estate - Wilton, CT
Fairfield County CT, CDPE Homes For Sale and Condo

Renee - Love this post!  You are very right about the way statistics are skewed everywhere, and exaggeration on facts is pretty rampant....

January 25, 2011 07:28 AM #71
Rainmaker
309,255
John DL Arendsen
TAG Real Estate Sales & Investments & ON THE LEVEL GC - Leucadia, CA
Real Estate Bkr, Factory Built home Dealer/Devlpr

Interesting. I hope your right about the big dump. If you're not there could be another decline one day when the industry least expects it and values could drop accordingly. I don't see a dramatic decline in value but even 10 percent could put a dent in our recovery. Good for the turn and burn short sale flippers bad for buy and hold homeowners desiring to purchase a home to live in.

January 25, 2011 10:43 AM #72
Rainer
283,673
Daniel J. Hunter
REALTOR® - New Port Richey, FL

hmmm, very interesting Renee

I had always thought shadow inventory were homes that were behind on their payments but not yet in foreclosure.

January 25, 2011 05:19 PM #73
Ambassador
2,371,224
Patricia Kennedy
Evers & Company Real Estate, Inc. - Washington, DC
For Your Home in the Capital

Renee, reading this post and the many comments is a wonderful education for all of us. 

January 25, 2011 09:16 PM #74
Rainer
33,194
Kate Reilly Lund
RE/MAX Diamond, Realtors - Edison, NJ

Good information. I am going to Reblog this because we are very down on the banks in NJ. We can't seem to get any action from them no matter what favorability there is.

Katie the Real Estate Lady

Kate Reilly Lund

http:www/kreillylund.remax-nj.com

January 26, 2011 01:50 PM #75
Rainer
33,194
Kate Reilly Lund
RE/MAX Diamond, Realtors - Edison, NJ

Good information. I am going to Reblog this because we are very down on the banks in NJ. We can't seem to get any action from them no matter what favorability there is.

Katie the Real Estate Lady

Kate Reilly Lund

http:www/kreillylund.remax-nj.com

January 26, 2011 01:50 PM #76
Rainmaker
193,827
Sandy McAlpine
McAlpine Properties - Cornelius, NC
Search Lake Norman Homes For Sale - Lake Norman NC

I don't believe that banks are holding inventory, but I do believe in hundreds of thousands of homeowners are currently in 90 day default and that is scary!!

January 26, 2011 03:47 PM #77
Rainer
165,557
David Evans
RE/MAX TOWN AND COUNTRY - Cumming, GA
HUD NLB Cumming GA

BANKS hold inventory because they still get their guaranteed payoff at the end and YES they are working it!

March 01, 2011 10:33 AM #78
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Renée Burrows

Las Vegas Real Estate Broker - www.urLVhome.com
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