Shadow Inventory. What is it and how will it effect you?

When making the decision to sell, buy or invest in today’s real estate market the most valuable asset a buyer or a seller can have is the most current and up to date information of what is going on locally and nationally.While in a real estate meeting this week, I came across some interesting statistics I think would be valuable to share.   I had the opportunity to meet with top foreclosure real estate specialists who had just come from a very informative meeting with top administrators of both Freddie Mac and Fannie Mae.

Statistics of future foreclosures were projected.   This is called “shadow inventory”.   These are homes that Freddie or Fannie has not received a mortgage payment on in the past 90 days to 2 years.   These are homes that will be foreclosed on in the future.   So what is the number?   Well, Fannie Mae is projecting about 5 million, Freddie Mac is projecting 3.5 million, and other national banks are looking to foreclose on 2 to 3 million homes.   Now these are national projections.   These foreclosed homes will be spread out across the country.

Keep in mind that Freddie Mac, Fannie Mae and other financial institutions already know that these foreclosures are going to happen.   What is being discussed is how to do it, without completely glutting the market with foreclosures.   It will be interesting to see how they go about dumping these homes onto the market little by little.

Housing Market Getting Worse? Let’s take a look….

There’s been quite a bit of bad news concerning real estate in recent weeks.   I have received many calls from potential sellers wondering if prices are going to continue to fall even more….On the other hand, my buyers can’t figure out why they can’t get a better deal…..What is causing this concern?

The Media

Let’s take a step back and remember that we are now into September.   In my opinion, once August hits, we begin to see a decline in the number of buyers looking for homes.   Yes, buyers are still out there, but the numbers are significantly less as compared to the April, May, June and July months.

Homes are still selling….and from what I see in the market, traditional sells are still selling for 10K to 25K more than foreclosures and short-sales.   This week new home builders were hit with bad news on their production statistics, but almost every new home builder I take my clients to are sold out…..there is no more inventory.   Also, keep in mind, that in the Northern Virginia area, we are still seeing multiple offers on traditional sales.

Of course, there are many of us still upside down in our mortgages and foreclosures are something that we see in almost every neighborhood, but our real estate market is still alive and homes are moving, and moving fast.

The big question I always get this time of year is….”Should I sell now?”

In the coming months, while we do see a shortage of buyers, home inventory is low.   This could be a positive for the seller.   Buyer’s in our market usually pay more for a traditional sell, and if there is less inventory, this translates to less competition.   This means your home has more opportunities to stand out.

In my opinion, our real estate market is recovering.   It is going to take years to recover completely.   It took many years to create this mess, and unfortunately, the majority of the public did not realize what was happening until it was too late.