What is Shadow Inventory?
The mortgage meltdown of 2007-2008 and the unprecedented number of foreclosures, left Lenders with a significant number of residential real estate holdings. Many lenders have been slow to put their holdings on the market to prevent flooding the market and driving down prices.
The questionable foreclosure practices that made news in 2010 have also made some lenders even more reluctant to place their inventory for sale.
The term “shadow inventory” refers to all those foreclosed/bank-owned properties that need to be sold but are currently being held back from the market. Shadow inventory hurts the market because it creates uncertainty about when any given local real estate market can expect “recovery”. Shadow Inventory also causes the reported data on housing inventory to understate the actual number of properties available.
Unfortunately, there is no way to know when these properties will be made available for sale.