Shadow inventory is the number of foreclosed homes not currently on the market.
What this means is that when this foreclosed inventory is unleashed, prices will be pushed down much further than projections estimated. Current estimates are a continued drop of 10 to 30% through December 2010.
RealtyTrac compared these figures to it's current inventory which only reflect 30% of foreclosures were listed.*
Also, there are many foreclosure moratoriums that are simply hedging the inevitable foreclosure. (CA SB1137 is one) These homes have not been reported, but they could be double the current projections.
What does this mean?
- Continued steep drops in home prices beyond the 10 to 30% projections
- Banks will become property managers and begin renting this inventory to reclaim their losses.
- The current US financial crisis is here to stay...I believe through 2012.
What I find particularly disturbing is that Wells Fargo reported record earnings today due to the resurgence of refinancing.
Is Wells Fargo hiding something...a stash of unreported or looming foreclosures?
Wells Fargo was the leader of the 80-20 loan just a few years ago.
Today's good news is tomorrows financial crisis. Spin City!
Best,
Kris Darney
Platinum Real estate
*San Francisco Chonicle
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Yup, it can certainly get worse. We moved from San Diego North County about 5 years ago, right about the time our new home, the Tri Cities of Washington State started appreciating. Our new area is still doing well despite the rest of the country.
I hope you are doing well in San Fran despite the market Kris & Kim. :)