Space Aliens, Ghosts and Shadow Inventory
What is it with this country and our morbid curiosity for the unknown, the mysterious and the enigmatic? We’re fascinated with space aliens, ghosts, zombies, vampires, a lone gunman on the grassy knoll, and Adele. Okay, maybe it’s just me that’s fascinated with Adele. It’s just that I’ve never heard a woman sing like that before.I guess this also explains why the mainstream media, bloggers and real estate pundits love talking about shadow inventory. It sounds so, I don’t know, shadowy.This love affair is so insatiable that the definition of shadow inventory is now regularly expanded so the phenomenon can be kept alive. When I first heard the term it was used to describe those houses owned by the bank that weren’t for sale on the multiple listing service. The shadow inventory definition was changed later to include those homes in the foreclosure process. When the number of homes in foreclosure started to dwindle all delinquent mortgages not yet in foreclosure were added to the list. Investopedia.com includes homes that owners are delaying putting on the market until prices improve in their definition of shadow inventory.Where does it end?Tom Ruff, a Phoenix housing expert with TheInformationMarket.com once said, “there are no shadows, we know where all the houses are.” He informed me that as of today there are 17,554 homes in foreclosure in greater-Phoenix. Okay, so that’s one mystery solved. His firm also tracks trustee’s deeds so he knows exactly how many homes in foreclosure end up in the hands of third party investors and banks. Ruff knows when those homes go on the multiple listing service. Another mystery solved.As for delinquent mortgages not yet in foreclosure, CoreLogic tracks delinquency rates in most major markets so that suspense is gone (in case you’re wondering, 6.86% of homeowners in greater-Phoenix are 90 days or more past due. The national average is 7.07%).It’s easy to see why some would say that houses owned by the bank but not for sale on the multiple listing service are in the shadows. But the definition should stop there. Not to be a drama killer but only a tiny, miniscule percentage of those homes in the foreclosure process and delinquent mortgages not yet in foreclosure will ever make it to auction.