Shadow inventory not a threat to housing, analysts say

A housing market recovery appears to be on the horizon, but some real estate experts warn that the existing shadow inventory could be a significant obstacle in the future.

A housing market recovery appears to be on the horizon, but some real estate experts warn that the existing shadow inventory could be a significant obstacle in the future. However, a new report indicates this variable could be less threatening than first thought.

The shadow inventory, which is defined as mortgages that are either in some state of the foreclosure process or in default, is really only prominent in isolated housing markets, according to a report from the Wall Street Journal.  

"The concept of a huge shadow inventory is preposterous," Beacon Economics housing economist Christopher Thornberg told the newspaper. "The number of mortgages in distress is way down from one year ago. It’s clear there are fewer distressed properties out there."

Property data from Barclays estimates the shadow inventory currently contains an estimated 2.4 million home loans. This is well below its peak in 2010, when there were 4.25 million mortgages in this supply.

Although the shadow inventory may not pose as big a threat, there are other factors that buyers, sellers and real estate professional need to keep an eye on. One particular variable is the estimated 11 million homeowners currently underwater, which is expected to weigh heavily on property inventories for quite some time.



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