bostonbubble.com

admin

The prospect of a large shadow inventory has long added an extra element of doubt to the potential frailty of real estate markets. The specter of lenders foreclosing on homes and then holding them off the market so as to constrain or delay the price declines of other homes is cause for concern for anybody with a stake in the market and anybody considering buying. In an effort to quantify the effect of shadow inventory and foreclosures in general on the Boston real estate market, Boston Bubble has partnered with RealtyStore to produce snapshots of the local market's composition based on the RealtyStore foreclosure listings data. The market composition for Massachusetts' Essex County on February 4, 2011 was:

Total homes for sale: 5,633
Foreclosures for sale: 375 ; 6.66%
REO shadow inventory: 10 ; 2.60% of foreclosures
Market median asking: $329,900
Foreclosure median asking: $154,900

It should be noted that what should be classified as "shadow inventory" is quite subjective and RealtyStore uses a very conservative definition. Specifically, for the numbers above, shadow inventory is "REO property which is held free and clear by an institutional owner but is not actively listed for re-sale or marketed to third parties, including the public." There are various stages leading up to this state which might also be legitimately included in a definition of shadow inventory but which are excluded above. On the opposite end of the spectrum, some people would include those homes where a single mortgage payment has been missed, and others would even include homes of owners/borrowers who have not missed a payment and who plan to list their homes if the market improves.

That said, the numbers above do not paint a picture of a market dominated by foreclosures or shadow inventory. It will be interesting to follow the numbers over time. The currently low percentages may be a result of the fact that Massachusetts is already the slowest out of all 50 states for the time it takes to foreclose, at an average time of over a full year. This was true even before the Ibanez ruling, which will undoubtedly prolong the process even further, possibly even bringing it to a halt for an indefinite period of time. S&P recently estimated Boston's shadow inventory at 62 months, suggesting that the relatively low percentage of REO shadow inventory is in large part due to a backlogged pipeline.

This data is also available for:

- admin