Back to Results
There have been countless stories in the past year about the impending shadow inventory that will soak the market soon. The shadow inventory is said to include a glut of bank-owned/REO homes that haven't been released on the market yet, as well as home sellers who are ready to sell, but are waiting for the market to get better.
During that same time, the current inventory of homes for sale in the Seattle area has actually been decreasing. NWMLS active listings are at 36,261 currently, with more than 10,000 of those listings being added during May. Still, that total inventory is 13% less than the real estate inventory at the same time last year. Multiple offer situations on homes in the Seattle metro are up more than 50% by many accounts, with well-priced homes moving quickly.
What's behind this divergence between expectations and reality? There has certainly been some delay in bank-owned homes being released on the market because of goverment regulation and changes in the foreclosure reporting process. I wouldn't be particularly surprised if the REO inventory opened up soon and we saw some increase in those home listings.
However, the other half of the "shadow inventory" is, in my opinion, just a poorly-analyzed statistic. Companies like Zillow have concluded from polls that a large group of potential home sellers who are waiting for the market to get better are also a part of the shadow inventory. The problem is that this group has always existed, during every real estate downturn. It's not an impending collection of homes getting ready to flood the market at the bottom. These people will only potentially sell when the market has already started appreciating again, and therefore will only affect that appreciating market. It could slow appreciation a bit, but it's nothing so ominous as to deserve the shadow inventory label.
Please enter a valid email address.
Stating a discriminatory preference in an advertisement for housing is illegal. If you think this content is discriminatory or otherwise inappropriate and feel it should be removed from Zillow, please let us know by completing the information above.
We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.
True, the banks usually bid near the value of their lien, but that amount includes 6-24 months of accrued (i.e. missed) mortgage payments plus penalties etc. This leaves no room for profit so nobody bids against them. In rare instances the banks will take a big haircut. You never know when or why, just have to be prepared if it happens. Sometimes the home owner had significant equity so there is a deal to be had in the first place (bizarre but happens more than you think), and private buyers will bid against each other. Most buyers at these auctions are what poker players would call "grinders". They research hundreds of properties each month with the hope of picking up a small handful of decent deals. Contrary to popular belief, you do not see $300k houses going for $100k unless they are hairy as Godzilla.You are correct about bank losses if Fannie/Freddie backed the loan and the bank is simply a middleman. F/F can't take gigantic losses either though nor can they micro manage each property. So... the shadow inventory builds.
Please enter text in the "Enter the text to display" field.
Please enter text in the "Enter URL" field.
Please enter a valid URL.
Please insert a video embed only
Zillow Advice depends on each member to keep it a safe, fun, and positive place. If you see abuse, flag it. More on our Good Neighbor Policy.
For Sale: $250,000
For Sale: $299,950
For Sale: $668,000