The Shadow Inventory Debate

Our unscientific Facebook poll on Shadow Inventory

Our unscientific Facebook poll on Shadow Inventory

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.

Archived Comments
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  1. Marta Walsh

    If you read Mike Orr’s full analysis it’s pretty much impossible to believe there is significant shadow inventory. His research is very detailed.

  2. Kelly Wells Maynard via Facebook

    I am the type of person that walks by faith, but this is one time when I will say: “I will believe it when I see it!”.

  3. Rob Cammarata via Facebook

    Orr is smarter than any other analyst in the real estate industry ….

  4. Jan Green via Facebook

    What shadow inventory?!

  5. Wally Neal

    In addition to the properties that are in the gap between foreclosure and listing for resale, “Shadow Inventory” includes the properties that are delinquent but have not started the process of foreclosure. The theory is that those lenders, for whatever reason, are not going after those properties in a timely manner. Fact is that the number of deliquencies is NOT there, plus the number is shrinking rather significantly. To the “shadow inventory” proponents, I ask “Specifically, what properties are you referring to?”

  6. Robert Miller

    There was a time when you could review the tax records of just about any community and find plenty of homes that were sitting idle 4-6 months since foreclosure. No more. It’s now very rare to find a property sitting idle. I think this “Myth” is residual.

  7. Jim Carlisto

    It just goes to show what many have been saying for a long time, national news is not regional news. If Shadow Inventory does exist in Florida or other states that have a judicial process, it does not mean it exists here. Sometimes reporters like to create drama when their is none! I guess only time will tell if us doubters are right! Shadow or no Shadow…bring on some more inventory!

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