What is Shadow Inventory
I've been hearing all this news about "shadow inventory has been declining" as it relates to home sales, so what is shadow inventory?
Shadow inventory is a term that implicates an unknown additional size of looming inventory. Similar to when an object casting a shadow that can make that object appear larger than it actually is but the size of the object is unknown based upon the shadow.
Wait a minute back up, what is inventory? Inventory as it relates to real estate is the amount of available real estate (supply) for sale.
The term shadow inventory has been used to describe those homes that are not available for sale but that are in the hands of a third party or about to be in the hands of a third party such as a bank/lender who has or is going to be foreclosing on a home. During the busted real estate market many lenders did not want to put their real estate on the market because they feared that flooding the market with these types of home would create a massive supply and would drive their prices down even further, which ultimately would lower their total return on investment.
Today's national news is that the shadow inventory is much lower than it's been in quite a while which eases pressure on the overall real estate market.
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