Is The Shadow Inventory Growing Or Receding?

We have not written an article for quite some time about the shadow inventory of homes, but I was just explaining it the other day to an investor.

These "homes that need to be sold" which are not currently on the market, represent more than a full year's supply of houses that will be coming onto the market now and in the immediate future.

So I was wondering, is this list of properties growing or is it finally shrinking?

Defining The Shadow Inventory Of Homes

Most real estate professionals define the shadow inventory of homes as all the unlisted distressed properties that remain from the bursting of the real estate bubble.

Some of them include homes that are several years deficient on their mortgage payments, while others include properties that have been foreclosed upon but the banks are not yet marketing for fear that they will glut the market.

But I also include homes that do not fall into these categories ... specifically homes that failed to sell in the past 7 years but have not yet come back onto the market. These are people who want to move, but feel they cannot get their home sold due to high mortgage levels or due to significant losses in equity.

New Entrants Into The Shadow Inventory

It is generally believed that bank owned inventories are receding, but there are still plenty of homes that failed to sell but as yet have not returned to the market. The following real estate graph shows the one-year trend of daily failures that did not relist, and you can see that it is growing.

Shadow Inventory: Homes that failed to sell

The trend reached 3.6 homes per day one year ago, and we are currently dealing with a trend of 4.3 homes per day.

This means that nearly 1,600 homes over the last year were listed for sale in the Tallahassee MLS but failed to sell and then chose not to try again. In simple terms, for every 2 homes that did sell, one failed and went to join the shadow inventory of homes.

If you are thinking about selling your home, you should be aware of this fact and know that you need more than the average effort from your real estate company.

If you would like to know more about how to sell your home without having to join the shadow inventory, just drop me a note and we can schedule a time to evaluate your home and give you the best advice available in the Tallahassee real estate market.

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