Oct 1, 2009

"Shadow Inventory"

Hello Neighbors,

I attended this month’s Finance Forum (meeting) at the Sacramento Association of Realtors branch office.

Interesting stuff.

A term we’ve been hearing more and more of recently was discussed….. “Shadow Inventory”.

What is Shadow Inventory?

Homes that are in some sort of Notice of Default (NOD) or foreclosure proceedings… but haven’t yet been taken back by the banks. Meaning? Homes that are vacant – or will be soon – that aren’t yet being reported on the bank’s financial books.

How much?

I heard an estimate this morning that shocked me: 35,000 – 40,000 homes in the “Greater Sacramento area”. Now that area probably includes parts of Sacramento County, Placer County, and even El Dorado County. If those numbers are correct, it is a HUGE amount of homes that will some day come to market. If. If. If.


Obviously, if such numbers exist, that has huge macro-economic implications. Prices will drop. Banks will be in financial trouble. Buyers will benefit – if they can get loans. Sellers will have to hold tight for much longer, or compete with insanely low price points.

HOWEVER, there is a problem – accurate data.

No one has actually published the data we need to verify such speculation. Search MLS and you will find that there isn’t much bank owned inventory now. It’s dried up. You can search county tax records, but those tools aren’t very user friendly. It would take days and days to compile such data. One industry professional says the inventory is there… another say the Obama plans have curbed the problem.


We continue to listen. Speculation runs from all ends of the spectrum. If we had the data, we could guide you in the right direction. Until then, we (all of us in this industry) continue to be reactive instead of proactive.

I’m looking forward to changing that behavior.

- Jim




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