Huge shadow inventory fueling home price fears
Want to know one of the scariest things out there right now when it comes to the precarious state of the housing market?
It's the huge amount of shadow inventory banks and other lenders are sitting on, ready to dump on the market as prices start to move upward again.
Of course, shadow inventory is the fancy name for foreclosed homes and condos that banks have taken back, but have yet to put on the market.
The numbers are staggering - 1.7 million homes across the country - owned by banks which eventually plan to dump them back on the market.
That's compares to about 3.7 million homes already for sale from Boston to San Francisco.
The debate now is whether the big banks will flood the market over the coming year with foreclosure specials, pushing home prices down again. If that happens, there's even the possibility of a double dip recession, retired Wellesley College professor and housing market guru Karl Case warns.
While the jury is still out on that one, there are signs some banks are starting to test the waters. Check this story out from Las Vegas.
In Nevada, Bank of America has announced plans to put 500 foreclosed homes a month on the market.
And given the massive inventory Bank of America and other big lenders are sitting on, this pattern is likely to be repeated across the country.
Bank of America alone took title to tens of thousands of homes each month towards the end of 2009.
Conveniently, at least one bank executive is blaming the backlog on the Obama Administration's loan modification campaign, reports the Las Vegas Journal Review, citing comments made at an industry conference. Banks are holding off on foreclosures as they attempt to work things out with struggling homeowners, which along with a myriad of temporary foreclosure moratoriums imposed by different states, has helped create the giant overhang, John Ciresi, a vice president and portfolio manager for Bank of America, is quoted as telling fellow industry executives.
Well at least now we know one thing. If Bank of America and other lenders swamp the housing market with foreclosures, sending prices plunging to new depths, it's pretty clear who they are going to pin the blame on.
