Shadow Inventory….What Is It?

Shadow Inventory….What Is It?

The term “shadow inventory” is commonly seen on the television, newspapers, and online news outlets. However, a lot of people remain confused about what the term is and what it means for the overall housing market. I feel as though a lot of news outlets have not done a good job actually explaining shadow inventory, which is why I aim to educate others on this term its implications for the Orange County and Huntington Beach real estate market.

What It Is:

Shadow inventory is a term used to describe homes that are in foreclosure and not yet put on the market, but will be one day. The banks own a bunch of homes due to foreclosures as a result of the housing bubble burst from 2007-2010. Instead of releasing all these homes at once, and causing an even more flooded market, they decided to hold some of their home inventory back to stabilize prices- they call those homes the “shadow inventory”. This was a smart move by the banks because it did two things for them:

  1. It allowed them to keep real assets on their balance sheet.
  2. It helped the market not spin completely out of control, thus letting the banks and others get better prices for their homes. If the banks released all their foreclosed homes at once it would have driven prices so far down (literally overnight) it would have been a devastating blow to an already depressed market.

Why Does This Matter?

The reason why this was such a popular topic was because no one knew how many homes the banks had and when they will ultimately sell all of them. Many people believed that the reason for the prolonged downturn in the housing market was due to the issue of shadow inventory. No one knew how many homes the banks had that were being strategically held off the market and slowly released. It is believed now that most of the banks do not have shadow inventory anymore since prices have stabilized and are even rising in some regions of the county, i.e. Orange County real estate and even more specifically Huntington Beach and Costa Mesa homes.

If you have any questions regarding real estate, or the real estate market, contact me. I’d love to answer any questions you have click “Lets Get Started” below to contact me .

Maybe you are thinking a single family home isn’t for you. Maybe you feel a townhome or condo is better for you.  Feel free to reach out as we have lists of current Huntington Beach condos for sale – please reach out if this interests you.

If you need help buying or selling a home, or property in Orange County, I would love to assist you with all your needs and making that experience as stress free and painless as possible for you.

Malakai Sparks
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