Shadow Inventory Not a Problem?

Shadow Inventory Not a problem?

According to the government it’s not. The GSE released its U.S. Economic and Housing Market Outlook for August on Wednesday, and overall the news was promising. Most notably were the number of states (34 and the District of Columbia) who saw home prices improve from June 2011 to June 2012. This was the best showing for states with rising home prices in over 5 years!

I temper this good news with some reality, there are still thousands of foreclosed homes in shadow inventory that are yet to be put on the market. These homes have been sitting abandoned for months and once they are put on the market, they will drive down prices, that is how the market works!

But Washington seems to think different. They point to the fact that even though there may be substantial inventory yet to be released, the number of “vacant” homes on the market currently is on the decline. It is thought that since there are less vacant homes to compete with the new vacant homes that are coming, this should counter any drastic drops in area prices. This seems a lot more like  “glass half-full” thinking here than good common sense.

What I do  notice is that the government and media are all trying hard to make Americans believe that the real estate market is turning the corner. Although this may be true, that corner has a few detours along with it and unless we take our time and figure things out we will be going around in circles for some time to come.

Do you think the GSE is correct in not worrying too much about shadow inventory? What are your thoughts?

-Noel Berrios
California’s Premiere Short Sale Law Group