“The debate among housing market watchers over whether metro Phoenix has a looming shadow inventory goes on, even as foreclosures fall and home prices keep rising,” says a recent Arizona Republic article. We see this topic in local blogs and on Facebook, but is there a pending shadow inventory tidal wave? We don’t think so.
The Information Market (now owned by ARMLS) tracks pre-foreclosures from the time they are going through the foreclosure process to when they emerge onto the markets as a listing or a sale. The difference between the two creates a gap. That gap is where the shadow inventory lives. In Arizona that gap is very small. Arizona has a non-judicial foreclosure process, which normally takes 90 days or so and does not involved a lawsuit, thus the time a property stays in the gap is much shorter than in other states.
We’re not the only ones unconvinced. CoreLogic stated that Arizona posted the biggest drop in seriously delinquent home mortgages. Michael Orr from the Cromford Report and ASU Real Estate Studies Department, thinks significant shadow inventory is a myth. Information from the Mortgage Bankers Association also supports a decrease in late payments from loan borrowers.