Foreclosure Figures: National Shadow Inventory Worth Hundreds of
Now, new figures reveal just how large the shadow inventory in the foreclosure market is – and what it means for the industry as a whole.
According to national credit reporting bureau Equifax, approximately $319.7 billion worth of home loans from 2006 and 2007 are in the initial stages of foreclosure. This is over $300 billion worth of distressed properties that have not yet been sold from 4-5 years ago - not counting the properties from after 2007 that have not yet been sold in the foreclosure process.
That is an incredible number, especially considering how limited a scope we’re talking about. Just consider the mortgages from 2008 to today that will be in foreclosure at some point down the road and you can see just how big the shadow inventory really is.
REOs are also high, with 3% of all mortgages going back to the bank after failing to be sold at foreclosure auctions. This market is a bit smaller, at only $21.8 billion, but is still a roadblock to full real estate recovery.
It is very likely that most of these distressed properties will ultimately be written off by banks, which will hinder lending. This is all good news, though, for prospective homebuyers and real estate investors who are interested in purchasing cheap homes to turn for a profit as the market recovers. Dirt-cheap interest loans are also incentives to buy because financing a new home purchase is cheaper now than it has ever been in many of our lifetimes.
We all know by now what shadow inventory is – the collection of mortgage delinquencies and defaults that have not yet been put on the market by underwater homeowners or homes that are in foreclosure but haven’t been sold or listed.