Shadow Inventory: Part Two of Three

Last week on our blog, we introduced the first of three blog posts examining a Wall Street Journal article that takes a deeper look into shadow inventory, and how it effects the housing market. We introduced shadow inventory as the amount of unlisted bank-owned homes that are not yet on the market as well as homes in preforeclosure that are likely headed to a trustee sale and will become bank-owned themselves.

The Banks’ Involvement Bank bag full of dollar bills

How banks dispose of shadow inventory and whether there are enough buyers willing to purchase these homes is worrisome to many financial advisers. Bank-owned foreclosures began rising again 2010 after a drop in the volume of bank-owned properties throughout 2009. Since September 2010, banks have been slowing down the foreclosure process, particularly in judicial states where courts are overwhelmed by the number of cases and banks have struggled with documentation of the mortgages they own.

Additionally, non-judicial states have recently passed laws imposing new requirements on banks before they foreclose, which is likely to further slow the process.

Shadow Inventory in Concentrated Markets

As previously stated in the part one of the article, shadow inventory isn’t a national phenomenon. It is concentrated in particular markets, and even in submarkets of those markets. These markets are very specific, and only in certain areas.

Stay tuned for next week’s blog post where we analyze the last of these three posts from The Wall Street Journal. If you have any questions or concerns about shadow inventory and how it effects the surrounding housing market in Atlanta, don’t hesitate to contact The Mortgage Guys.

View the first blog post: Shadow Inventory: What is it and Should We Worry?

Photo courtesy of Flickr.