The question surrounding our market lately is shadow inventory and how will it affect us. Well in my opinion, it is a very good question as it is a question I have been asking myself and our agents for several months. Over the past 18-24 months we have heard about foreclosure being released into the market – it hasn’t happened as of yet. The latest indication from asset managers is that properties will be released in the 2nd quarter of this year. We shall see if it occurs.
The question I ask is for agents to look around their neighborhood for vacant properties not currently listed for sale, and ask their neighbors and friends if they see many unlisted vacant houses. The answer I typically get is no, there aren’t that many.
We ask how many of your friends or neighbors outside of real estate are unemployed locally. The answer, not many. We ask our agents if requests for BPO’s (broker price opinions) are on the rise, steady or going down – here you get a very mixed bag but mostly we hear they are going up, but only slightly.
We run MRIS numbers Friday mornings in Fairfax, Loudoun, Prince William, Arlington, Fauquier, Alexandria City, Fairfax City, Falls Church City, Manassas City and Manassas Park for resales only in the categories of actives, under contract, settled the last 30 days, vacant, and rentals to help us determine trends in the market. As of this past Friday, there were 4,727 active resales in these areas. 335 were listed as foreclosures, 931 were listed as short sales and 41 were listed as undisclosed (which are more than likely short sales) which represents 28% of the inventory. These numbers are below 2008 numbers when we experienced our foreclosure boom. And, our inventory numbers are down 54% from the same week last year and are down 70% from 2 years ago. Plus, we only have a 2.5 month supply of homes.
So where will the shadow inventory come from is the question and I believe it is foreclosures and unapproved short sales. What dictates foreclosures? Unemployment is one of the biggest factors. The job loss to foreclosure ratio is 6 – 1. I understand that unemployment in Northern Virginia is around 4.2% which is very low. Job relocation and subsequent inability to sell. Well national unemployment is over 10% and companies are relocating here so we are seeing fewer relocations out of the area. Divorce is another factor – it is my understanding that they are down because people are under water with values and can’t afford to finalize divorces. So it seems unlikely we will see a huge influx on inventory from these areas but we do have two real threats in our future – Prime loan ARM readjustments and the eventual unapproved short sales inventory being reentered into inventory. The only issue is we are unsure of the true number we have here in our area and if it will have any significant impact.
We will have “shadow” inventory but I don’t believe it to be a real threat to our market as our inventory level is low and we should be able to absorb it with the pent up demand we are experiencing with the home buyer tax credit expansion and extension coupled with low rates and reduced valuations of properties. Get it? Got it? Good!
Now, go sell something!
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