Shadow Shadow Inventory Growing Larger

August 26, 2010: There’s “shadow inventory” which are bank owned homes that are just sitting there empty, for now. The bank slowly puts those homes back on the market all the while trying not to flood the market with too many homes too fast and cause a precipitous drop in home prices.

Then there’s “shadow shadow inventory” which are homes owned by regular people who are delinquent or in foreclosure, but those homes haven’t been sold at foreclosure yet, and thus, haven’t gone back to the bank, yet. The bank slowly puts those homes in foreclosure all the while trying not to have too many of those homes go into foreclosure to quickly which will also cause a drop in home prices.

Falling prices could drive more homeowners into foreclosure, which is the last thing most markets need.

According to Housing Wire, the absolute number of households in trouble is sobering. 5.3m households are currently delinquent on their mortgage. Add in the 2.5m that are already going through the foreclosure process, and a total of 7.8m households are in danger of losing their home. As for home-loan delinquencies, Nevada still leads the nation as unemployed and underwater homeowners continue to move into default and toward foreclosure at high rates; a whopping sixteen percent (16%) of Nevada homeowners are late on their mortgage.

Many owe more on mortgages than their homes are worth. Households often opt to stay put rather than default, leaving them trapped in places with high unemployment and unable to move to where jobs are plentiful.

At current low sales rates, it may take a decade to clear the backlog of houses owned by the banks.

The banks are faced with the unenviable task of determining how fast to foreclose on the 7.8 million homes inevitably heading back to the bank. In addition to regulating how fast to force a homeowner into foreclosure, once in foreclosure the bank regulates how fast to foreclose. This strategy is similar to the Wall Street “pump and dump” scheme which involves manipulating stock prices by determining how fast or how slow to release a stock into the stock market. This phenomena probably explains why some homeowners live in their homes mortgage-free for years, while others go into foreclosure within days of not paying their mortgage.

About Stout Law Firm

James Stout has practiced law in Orange County since 1995 and is highly regarded by the business community. He has passed three bar exams, California, Arizona and Nevada.
This entry was posted in Off Topic, Uncategorized. Bookmark the permalink.

1 Response to Shadow Shadow Inventory Growing Larger

  1. gorgeouskim says:

    hi there hows it going


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s