Is The Shadow Inventory Of Foreclosed Homes Finally Coming To Market?
There has been a lot of talk in the real estate community about a large number of homes that are still in some state of the foreclosure process, but not really processed at all. It's knonwn as the "Shadow Inventory". Across the country homes sit in limbo, not yet completely foreclosed or not made ready for market. Neighbors in communities constantly are irritated by them, investors salivate over them and there are even families that live in them for years waiting for an eviction notice to arrive. As real estate professionals we study the public records, we see the properties that have just recently received foreclosure notifications; and have watched others that have sat on the sidelines in foreclosure year after year.
So when will this "shadow inventory" of properties, these vacant, abandoned and/or ignored homes come to market? That time may be now and both buyer and seller should take notice.
There has always been the concern that when the banks release their foreclosed properties, home prices will drop again. Sarasota, Florida is especially wary of such an event after coming out of a 24 month supply of single family home inventory and nearly 42 months supply of condos from back in 2008. Sarasota currently enjoys a fairly normal market, bouncing between the lines of a sellers market, buyer's market and the 6 month inventory of a balanced market. With the housing bubble in the rear view mirror, nearly everyone in Sarasota and Manatee Counties nervously waits and watches every move of the banks and investor groups that hold the fate of the foreclosed home market. So far the flood of homes has not hit the market, they have only trickled in. However, I believe this is about to change: banks are getting ready to foreclose on more homes and release the ones they already have in their portfolio.
What makes me think the time has finally come where the banks start to release their shadow inventory of foreclosed homes on the market? Well, since the beginning of the year, January 2nd to be exact, I have noticed a significant increase in the number of broker price opinion requests. Nothing unusual you may think, but yet it is. The volume of BPOs had significantly dropped in 2013 on Florida's Suncoast. The reason for that are increased home prices in Sarasota and Manatee Counties, which now allow sellers to either break even or sell at a profit. The requests for broker price opinions that we see are mostly for vacant homes that have been in the foreclosure process for years.
In my opinion the banks are getting ready to complete the foreclosure process and bring these vacant homes on the market. One might wonder why the banks have been waiting all these years to finally list these homes for sale. Up until recently, we had an oversupply of homes for sale in Sarasota and Manatee Counties, and prices were depressed. Adding more homes for sale would not have helped the situation or their bottom lines. Now that there is a balanced inventory of homes for sale in the area, the time is to be right for owners to list their homes for sale.
Owners that have recently fallen behind on their payments may have a chance to sell and pay their bank off, thanks to the increasing market values. Sarasota County real estate saw a median increase of 15% in 2013 alone. There may be enough value in some homes for owners to get above water.
The banks are realizing as well that home prices have been increasing and there is more demand for homes for sale. Are they going to flood the market? Are home prices going to drop? Most real estate professionals don’t think so. The general opinion is that they will price the homes close to their fair market value and release them slowly. Banks may be getting ready to foreclose on more homes and list them for sale, but they will not drop them in large numbers. They will very likely release them slowly to avoid another real estate drop or market turmoil.
What does that mean for the consumer? If you are a seller, you will see an increase in competition to your home. The sooner you list your home and get it sold, the better. As a buyer you will have more to choose from. Bank foreclosures are not always easy to deal with and can have a host of challenges, however they present great buying opportunities. Either way, the golden age of real estate is now! We currently have a unique mix of affordability historically low interest rates.
So, is the shadow inventory of foreclosed homes finally coming to market? My recommendation would be not to wait for the shadow inventory to hit the market, the time to buy or sell your home (especially in Sarasota and Manatee Counties) is now!
Guest Writer: Anja Buetergerds of The Sarasota Suncoast Team.