The “shadow inventory” has been talked about by Economists
and Real Estate Analysts on many occasions over the past few years. The suggestions
have been that a massive inventory of homes is being held back by banks and
that when they release them, a downward spiral in home values would again destroy
the stability of the housing market. Seeing the number of Short Sales in the Tampa real estate market climb since 2007, my thoughts were the fear was well founded.
But according to a white paper written by Florida Realtors
Chief Economist Dr. John Tuccillo, the fear of a shadow inventory is overrated.
He says the reality is much different.
According to Tuccillo, Banks and Lenders have no desire to
release their inventory of repossessed homes if it will lead to lower prices and
impact their profit. As it stands, Foreclosures in Tampa and surrounding
communities are being sold at numbers much higher than the initial asking
Recently, a foreclosed home in the Sheldon Chase subdivision
of Tampa was sold thru the gohoming.com home auction web site. The property was
offered at $55,000, but ended up selling for $85,000. Another in the Trinity
area was listed at $198,000 and received offers as high as $260,000 according
to the listing broker. This has become
quite common all over the Tampa Bay area and is not limited to distressed homes only.
Prices are being driven up by a lack of inventory and an
excess of home buyers, so why would Banks do anything to change that dynamic. They
may not get what was originally borrowed, but they’re sure to get much more given the current market conditions by
slowly releasing what they have.
Statistics show that foreclosed property sales and listings
in the Tampa Bay area have been on the decline late in 2010. That number has
started to rise over the past few months, but those homes are snapped up almost
as quickly as they hit the market.
Short Sale homes-which are included in the “Shadow Inventory”
have climbed during that same period. These homes are offered for sale prior to going to foreclosure, eliminating some potential bank
owned properties that lenders would have to hold. Banks are starting to
speed up the approval process for these types of sales which is better for all
parties in the long run.
Florida’s shadow inventory was estimated to be around 550,000
properties in December of 2011, a decline of about 9% from the first quarter of
2010. The number of foreclosures in Tampa Bay was much lower in February of
2012 than it was one year earlier and the inventory of Short Sale properties available is half of what it was 2 years ago, suggesting a slower shadow inventory growth.
The chances of a downturn in the housing market because thousands of distressed properties are dumped in to the market appears to be
something that is not going to occur. And with the low inventory of homes right
now, I’m not sure it would do much to put downward pressure on home prices in
our area even if they were.
Tony Delgado-RE/MAX Bay to Bay-South Tampa