Much has been made in recent months of the so-called “shadow inventory,” a huge pool of bank-owned properties yet to reach market, which some claim will create havoc on local real estate prices.
Almost 90 percent of the properties foreclosed on in January 2008 – 708 out of 802 – were purchased at auction by the lender. By December 2009, even as foreclosures were continuing at a high pace, banks took back only 578 of 858 foreclosed properties, or 67 percent – a more than 25 percent drop in the bank take-back rate.
Some of the purchasers of foreclosed properties include real estate trusts and condo associations, which can also initiate foreclosures.
But even when banks took back the properties, they had success in moving those REOs off their books. More than 70 percent of the foreclosures that banks took back from April through September of last year, or 2,614 properties, were sold within the last six months.
That leaves 1,065 unsold REO properties as the so-called shadow inventory. That number becomes even less daunting when considering that last year, total listings per month ranged from a high of 42,355 in June to a low of 30,685 in December, according to the Massachusetts Association of Realtors
So the MAR (which I understand some readers don’t trust) seems to think that the “shadow inventory” debate is exaggerated as it pertains to local real estate prices.