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"Shadow Inventory" Lurks Behind Housing Market
I continue to be confused by conflicting information about the housing market. I understand that this article is saying 1.6 million foreclosures are in the "shadows" waiting to be released. However, it also says that almost half the inventory is not yet in the foreclosure process. Given that banks don't want properties to go into foreclosure, because it costs more than short selling or keeping people in their homes, and given that about 58% of homes in foreclosure end up being refinanced (according to a U-T article), how does this translate into "opening the floodgates on a backlog of delinquent properties?" I asked a realtor (yes, a biased source but nevertheless one that provides a counterpoint, which this article does not), and here's what he said: "I have a very hard time believing what I read as failed logic used in [this] article 1) It says [almost half of] this “shadow inventory” has yet to be termed delinquent...so at this time the loans are current and performing. 2) Next, it talks about banks flooding the market with this same “shadow inventory,” which has yet to even go delinquent. I fail to understand how a home which is not delinquent currently could ever be foreclosed upon and sent to market by an institution which has no control over it. Secondarily, this same institution doesn’t want to foreclose on any of these homes because they make a far lower return. Furthermore, as most areas have hit their gross rent multiplier level, it is cheaper to own that rent, so all of the “shadow buyers” out there waiting in the wings continue to buy great deals and lock in their housing expenses for the rest of their lives/foreseeable future, while those renting will be faced with continued rental increases throughout the upcoming inflationary period." Can anyone comment on this to help me and other readers make sense of what's really going on? Can the author of this article provide CoreLogic's response to this realtor's take? Thank you.— April 11, 2012 1:47 p.m.