The real estate market across the county came alive in late 2012 with home sales and housing starts up strongly. Prices are doing better, too. But skeptics still point to sizable overhang of properties headed to foreclosure--the so called "shadow" inventory--that they say will erode the market's recent gains. Maybe.
While the shadow inventory remains high, it may not choke off the strength we're seeing. There are several reasons, first the number of homes in foreclosure is shrinking, down from a peak of 4.7 million nationally in 2009 to 3.4 million at the end of 2012. The discount at which foreclosures sell has narrowed significantly, from around 24% in 2009 to 7% now. Inventories of new homes for sale are tight and the number of listings of previously owned homes is at an eleven year low.
On the demand side, sales of new homes are up strongly and sales of previously owned homes are likely to follow. Investor buying has slowed in most areas as well. Mortgage rates remain at historic lows for those who can qualify and are likely to stay low for the next several years. Banks have become more adept at handling foreclosures and realize it's not in their interest to dump large numbers of houses on the market. They do more short sales now, where they allow the home owner to sell for less than the mortgage owned--faster and less costly for the bank.
It's going to take years for housing is back to normal, but as long the recovery continues, however slowly, the shadow market should have little effect.
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