Shadow Inventory has been a HUGE boogeyman in the Las Vegas Real Estate Market. Experts wring their hands and have been telling us for YEARS how we are just going to get a bunch of Las Vegas REOhomes for sale just dumped on us overnight.
I actually feel bad for those that parrot what they hear on the news and pretend that they know what they are talking about. Some people’s perception of REO shadow inventory is that banks just sit there and hold on to properties that have already been through the foreclosure process. This could be further from the truth. Banks (or servicers to lienholders/investors) DO NOT want to hold on to inventory or assets longer than they have to.
They want to get this stuff off their books & quickly!
There are many things that hold up the process to get them listed by a real estate agent on the free market such as bankruptcy, tenants, unwilling occupants, trash outs and even property rehab. Once those items are taken care of, the home is listed or sold to investors in bulk packages.
Another way shadow inventory is presented is how many homes are in default or at risk of default. Unfortunately this is not a good indicator for “the big dump” because many real estate market forces will absorb that inventory: the homeowner could accept a loan modification, the homeowner could short sale the home successfully or an investor could purchase the home at the trustee sale or foreclosure auction and either rehab and resell or rehab and rent out for a long term hold.
Las Vegas Foreclosures will be around for awhile – I am not doubting that. The only thing I doubt is that the shadow inventory fairy dumps an abundance of inventory on us one day. I have been hearing about this for two years, I am sure I will be hearing about it for the next two years. The only way we will see an abundance of inventory GROW is if all the Las Vegas Buyers decided to leave the building all at once. Doubtful – but I have been wrong before.