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Home Sale Prices Are Up, But What About The “Shadow Inventory”.

posted by : ThomasC on August 6, 2012

Recent DataQuick reports have shown that For Sale inventory in many markets is very tight, as real estate owned (REO or foreclosure) sales have dropped off. Our most recent report on Phoenix, for example, showed a 1.3% gain in prices due in part to a 2.1% drop in REO sales from the previous month.

Will this trend continue, or is there a “shadow inventory” of REO’s lurking out there. DataQuick’s RiskFinder Distress model provides insight into the level of foreclosures banks are holding.

One thing that is certain in Phoenix; there are still a lot of REO’s out there that will someday hit the market. In April, DataQuick forecasts that there were more than 11,000 single-family REO’s being held in inventory by banks.

Interestingly, the level of inventory isn’t homogeneous across the metropolitan area. One-third of the inventory comes from only 16 of the 128 ZIP Codes in the Phoenix area. While the 11,000 REO’s held in inventory represents about 1% of all single-family homes, the concentration in the top 16 ZIP Codes is over double that – on average about 2% of all homes are in foreclosure in these ZIP Codes. In three of these ZIP Codes the percentage in foreclosure is over 2.5% of all single-family residences. Strangely, while the overall rate of REO resales compared to REO inventory is around 11.5%, the rate of REO resales to REO inventory in these 16 ZIP Codes is under 10%.

For more information about DataQuick’s RiskFinder Distress, visit this link at RiskFinder Distress.

3 Responses to Home Sale Prices Are Up, But What About The “Shadow Inventory”.

  1. ThomasC says:

    Follow up…an article in the Wall Street Journal today validates the point. Shadow inventory overall isn’t that big and scary monster we’ve all heard about, but in some markets, like Phoenix, it’s definitely an issue.

  2. Mary Gorges says:

    Tom. Just came across this now while I was looking around on’s site. How do you see the market in Marin, CA? Seems like the high rents in San Fran are spilling over into Marin. Saw a weird church-like house today in Marin asking for $3500 a month in rent.

  3. Thomas says:

    Yes, from our September Bay Area report (link below)we commented that for sale inventory is very tight.

    As our president John Walsh has commmented: “Potential buyers are also encountering fewer homes for sale. Additionally, going through today’s qualification process for a mortgage is still a real grind,”

    Marin sales volume is up year-over-year, but not substantially, and the median price paid is up over 3%

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