How Many Homes Are In The Shadow Inventory

Posted by Joe Manausa on Wednesday, July 1st, 2009 at 11:07am.

If you read the most recent Tallahassee Real Estate Newsletter, then you will know a little about the supply of homes that we know exists that are not currently on the market. This "shadow inventory" is the growing number of homes that were once on the market and failed to sell, or are the homes that we know are currently distressed properties but are yet to hit the market as short sales or foreclosures.

One way that we can monitor the shadow inventory is to track home mortgage loan defaults and delinquencies, and thanks to Tallahassee Real Estate Blog Reader "Doug," we have a site that will give us some of this surprising information.

Doug writes:

Great Charts, appreciate the effort you put into them.   I think the market is a little more dire myself. I found an interesting web site (Federal Reserve Bank of New York, dynamic map) Its mainly a state by state comparison , but it really is disturbing when you compare Alt A and Sub Prime loans in Florida to other states. With  Alt-A loans in Florida the number of loans late in the past 12 months were 49.5% (worst in the nation) the share of foreclosures is 22.7% (worst in the nation).  With sub-prime the number of Florida loans late in the past 12 months is 72.2% (worst in the nation) and the share of foreclosure  is 27.6% (worst in the nation).  These are very disturbing figures. I know it is more indicative of central and south Florida, but there is reason to believe that this caries over statewide. These figures are as of April this year. They can be viewed at  the New York Fed Web Site. I think there are a lot of people out there barely hanging on and with resets coming, it could get worse.  Price your houses to sell........!

I want to thank Doug for the great link, as it appears to be a great source of information that can help us better understand the shadow inventory and its expected growth.

Shadow Inventory Grows With Distressed Properties

The information about nonprime mortgage conditions in Leon County is very interesting to me. The following table is a summary that I created from the information on loan performance data:

Nonprime Mortgage Conditions Subprime Alt-A
Loans per 1000 housing units 28.0 15.9
In foreclosure per 1000 housing units 7.7 3.6
REOs per 1000 housing units 1.5 0.4
Share ARMs 63.9% 57.4%
Share Current 41.3% 57.6%
Share 90 days delinquent 13.2% 9.1%
Share in foreclosure 27.6% 22.7%
Median combined LTV 85.0% 80.0%
Share low FICO & high LTV 9.4% 30.0%
Share low or no documentation 41.1% 79.1%
Share ARMS resetting in 12 mos. 10.7% 5.3%
Share late payment last 12 mos. 72.2% 49.5%

If these numbers are correct, the we can conclude the following about distressed homes in Tallahassee:

  • There are 5,000 homes in Tallahassee that have nonprime mortgages
  • There are 1,250 nonprime mortgage foreclosures in Tallahassee
  • Banks hold (REO) 210 Tallahassee homes in inventory from nonprime mortgages
  • Nonprime mortgaged properties will add 2,000 - 3,000 homes to the shadow inventory

Shadow Inventory Also Includes Homes That Failed To Sell

The problem with getting too focused on the data from above is that it only represents the Tallahassee distressed properties that have Subprime and Alt-A loans. There are plenty of other homes in a similar situation that have conventional loans and homes that did not sell during a recent marketing period but are not yet back on the market. These homesellers are just waiting for the market to improve.

Tallahassee Shadow Inventory Of Homes Is Substantial

If we look at home sales trends in Tallahassee over the past 20 years, we would expect Tallahassee to have about 5,000 home sales this year were it not for market cycles. The information provided about nonprime mortgage loans, plus our knowledge of the homes that have recently failed to sell in the Tallahassee real estate market leads me to believe our shadow inventory of homes exceeds 1 normal year of supply. At today's current rate of sales, that is over 2 years supply of homes!

subscribe-to-the-exclusive-tallahassee-real-estate-newsletter

Subscribe in a reader Subscribe by email

As a reminder for those who subscribe to the Tallahassee Real Estate Blog by email, some embedded pictures and videos might not be appearing in your email and you might need to click the title header to go to your browser where all will be visible. Additionally, if you would like to respond (leave a comment) to this article, you will need to “click through” to the blog site to post your feedback.

Keep checking out the Tallahassee Real Estate Blog every day for updates on real estate in Tallahassee Florida.
If you like this Article then please subscribe to my blog through a full RSS feed, or you can Subscribe by Email. You will be able to stay informed about the happenings in the Tallahassee Real Estate Market.
Joe Manausa is a real estate blogger, a real estate investor and the Broker and Co-Owner of Joe Manausa Real Estate. He can be reached via e-mail through the Tallahassee Real Estate Website or catch his latest writings on the Tallahassee Florida Real Estate Blog , or by calling (850) 386-2001.
NewsletterArchives MarketReportBlog

 View Joe Manausa's profile on LinkedIn

Joe Manausa, MBA is a 26 year veteran of real estate brokerage in Tallahassee, Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.

Leave a Comment