Steamboat Springs Has Shadow Inventory, But What's That?

By
Real Estate Agent with Steamboat Sotheby's International Realty

Steamboat Springs Has Shadow Inventory, But What's That?

If you're thinking Shadow Inventory in Steamboat Springs has anything to do with the sunshine we enjoy here many days of the year...well you're definitely not thinking in real estate terms. Shadow Inventory in real estate has nothing to do with sunshine. But yes Shadow Inventory is in Steamboat Springs, Colorado and quite frankly it’s across the country, not just in big cities hard hit by the real estate downturn. So now that we know it’s here in Steamboat Springs, let’s dig in further and understand what it is.

Shadow Inventory Defined: It’s the inventory of homes not yet for sale that will be on the market in the near future and are defined as Distressed Properties:

*  properties already foreclosed on and owned by the banks (REOs)

*  those homes in the foreclosure process

*  homes where the owners are at least 90 days delinquent on their mortgage payment

Walking Shadow

So if Shadow Inventory is not on the market yet, why talk about it?

*  The main reason is because it’s slowly being put in the market and there’s quite an inventory to work through – nationally, an estimated 70% of bank owned repossessed homes is still “in the Shadow” and has not made it to market.

*  The National Association of Realtors recently reported that over 30% of all home sales in the past few months have been distressed properties – meaning about 1 in 3 homes recently sold were formerly classified as Shadow Inventory and made it into the market to compete with non-distressed homes for sale.

*  So John and Sally who are selling to trade up their starter home to a bigger family-friendly home or Dave and Cheryl who are selling because of relocating for a job change are trying to get their investment back on their homes in order to reinvest in real estate again. But on average, 1 out of 3 times, they are competing against banks who are basically looking to get “something” back on their home loan dollar…definitely not any sort of gain on investment.

Net result: Shadow Inventory drives home prices down.

So back to Steamboat Springs, CO – just what percent of recent sales have been bank distressed property sales (former Shadow Inventory)?

In August, 17 bank sales closed accounting for just under 8% of August gross volume and just under 13% of the overall August transactions.

*  2011 year-to-date August, there have been 109 bank sales accounting for just under 10% of overall 2011 gross volume and just over 12% of the 2011 transactions year to date.

In closing, why understand and keep an eye on Shadow Inventory when it appears not to have a huge impact on the Steamboat Springs real estate market?

*  Even if bank owned sales are not as prevalent in Steamboat Springs, CO, there is still local inventory the banks need to work through, and bank owned sales, by the nature of what they represent, bring down market prices.

*  Steamboat Springs, Colorado is a ski resort town whose real estate industry “banks” on second home sales – if Shadow Inventory is hurting market prices in other areas of the country, areas we historically attracted second home buyers from, then those potential buyers may decide to stay-the-course and not invest in a second home here in Steamboat Springs, CO until they feel better about the market.

*  With 70% of the bank owned inventory still “in the shadows” according to national statistics, it could be quite a while until market confidence returns.

*  In Steamboat, we have seen a little decrease in distressed properties but more importantly we’ve seen an increase in buyers. So our inventory is holding steady at around 2,000 properties. And thus prices are holding relatively flat.

*  If in Steamboat we see a large increase in Shadow Inventory hitting the market, we will see an increase of inventory and thus a longer time on the market for real estate and thus an unsettling of prices. Or prices will most likely fall.

---For more information on buying real estate or questions regarding Steamboat Springs real estate or renting a home in Steamboat Springs, Colorado, feel free to call Charlie at 970-846-6435 or write me an email at: charlie@steamboatsmyhome.com.

Thanks,

Charlie

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shadow inventory
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Rainmaker
791,593
Al Raymondi
Ocean View Realty Group in Ormond By The Sea Florida - Ormond Beach, FL
Ormond By The Sea Florida - Home and Condo Sales a

Nice post Charlie, We have quite a second home market here too and the threat of falling values may keeping many potential buyers on the sidelines. 

October 05, 2011 09:39 PM #1
Rainmaker
283,115
Charlie Dresen
Steamboat Sotheby's International Realty - Steamboat Springs, CO
Steamboat Springs, CO e-Pro

I know there are many on the side lines here. And these latest events in the stock market are not help things. oh well. 

October 05, 2011 10:30 PM #2
Rainmaker
225,806
Bret & Meredith Amon
Re/Max Properties of the Summit - Breckenridge, CO
Real Estate Breckenridge,Keystone & more

after reading this I am thinking Breckenridge has a bit of shadow inventory as well--

 

Good post

October 07, 2011 10:22 AM #3
Rainmaker
283,115
Charlie Dresen
Steamboat Sotheby's International Realty - Steamboat Springs, CO
Steamboat Springs, CO e-Pro

Thanks Amon Team. I'm sure there's more than we'd like to know.

October 07, 2011 06:13 PM #4
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Rainmaker
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Charlie Dresen

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