First things first, what are these “Shadow Inventory of Homes”?
The “Shadow Inventory of Homes” is homes that normally would have already been foreclosure properties. These homes have been delayed from going into foreclosure by loan modifications, moratoriums or otherwise being stuck in never-never land between delinquency and repossession. Due to efficiency increases of banks and government, these types of homes are moving through the system at a faster rate and will soon hit the market as short sales or foreclosure sales.
What will this do to the value of homes?
From several studies conducted by independent consultant firms such as John Burns Real Estate Consulting, the Bookings Institute and many others and also the reports in the Wall Street Journal, the belief is that values will fall again. Some feel that the fall will be rapid and hopefully short lived and others feel that the fall will continue on for several years. No matter what happens the values will more than likely fall or in the best case scenario, remain constant.
The main reason for this value decline is the sheer numbers of homes on the market. In the majority of the markets across the US the current supply of homes will take over 1 year to be absorbed. This 1 year absorption does not take into account this new influx of homes. To top all that off, many lending institutions have already exhibited their lack of tolerance in holding on to a property and selling it for a reasonable price. Their goal it to get the property off the books rapidly and if that means lowering the price to do so, then that is what they do.
On the bright side, if you are an investor, these homes will probably be sold at a much lower price and this will help the movement of these homes through the market. The hope is that the investor movement of these homes will be at such a pace (due to the low prices) that the effects of these homes coming on the market will be limited.
We can only hope!
Again, small business to the rescue…..You have to love those entrepreneurs!
About the Author: Robert Koppes is the owner of KT Appraisal Services, LLC and is a Certified Residential Real Estate Appraiser with the State of Georgia (License # CR004733). He holds the CREA designation from the National Association of Real Estate Appraisers and also holds the MRA designation from the National Association of Master Appraisers. Robert has been an appraiser since 1994. Robert’s areas of specialty include valuation of properties in the 20 county Metro Atlanta area with emphasis on Conventional and FHA funding and consultation and valuation of foreclosure properties. He can be reached at 678-254-4050 or by email at email@example.com.