Where are all the Foreclosures? Only the Shadow Knows ….

shadow18  How many foreclosures are out there?  As far as I can tell “Only the Shadow Knows”.

The new buzz is there is a large shadow inventory of foreclosures yet to hit the housing market.

Keeping this inventory of homes off  market helps to stabalize prices of homes in the short term.

Imagine all these homes coming on the market at one time. There would not be enough buyers to absorb the number of homes for sale and this would  cause home prices to tumble.

But lets say we hold onto the homes and keep them off market. 

The result would be a steady flow of homes for sale and a more steady market and this would be good for the real estate market.

Why because the ratio between home buyers and homes for sale is an important number. This is called the Absorbtion Rate.

If there are more homes for sale than buyers this is called a buyers market. In a buyers market home prices will be lower.

If there are more buyers than homes this is called a sellers market. In a sellers market home prices will be higher.

So the logical thing for banks to do right now is to keep homes off the market until there are fewer homes  than buyers. By keeping homes off the market banks feel the homes will be worth more. 

 In math we were taught the theory of  “two negatives equal a positive”. 

 I am not sure this is the right position for the bank because we are talking about money here and the value of money does not remain stable over time.

We can see that now in the stock market and in the Euro Zone, and  Greece. What was worth a dollar today may not be worth that in the future. So if the bank holds on to a bad asset too long it might be actually worth less. This is a gamble the banks are taking.

  1. JoAnn Kennedy

    Hi
    I am trying to convicen Paul Kiel, reporter, ProPublica that the banksters have at their disposal a liquid commodity real estate, the means to finance it, mortgage loan, and the insurance. I believe the greedy banks still want more $$$. So the Banksters have crippled the Real Estate market. The indirect result (as you know) is deflated values & housing prices, lower tax assessments, consumer goods fall off:(no new rugs, furniture, washer/dryer/stove etc),
    construction jobs & retail jobs disappear. He thinks I am a nut. What is your opinion, and don’t write me write him. We need to stop the banks from doing this to OUR country. I worked for a contractor developer last summer 2009 , I liked my job at Stocker Mills Estates, now the development is struggling and also in it’s own serious trouble.

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