Out of the Shadows in Phoenix, Part 1

Arizona real estate - out of the shadows

The elephant in the room of Phoenix real estate is shadow inventory, a stockpile of homes pending foreclosure, homes reclaimed by banks but not put on the market yet, homes awaiting auction  by banks that are likely to wind up with investors who will resell them, homes that will fall into foreclosures after their owners walk away an abandon them.  In a market where home are already down 22%, the prospect that the market could be flooded with countless numbers of budget homes is frustrating when the prices are just showing signs of recovery.  No one knows the day or the hour – or even the number.

But is it expected to come.  According to Arizona housing analyst RL Brown, “Phoenix’s shadow inventory is very real and very scary when you think about all the homes that could flood the market. Some people are in denial about the area’s shadow inventory, but by being informed on what could impact the market, we can all make s better real-estate decisions.”

 

What makes analysts so sure that the shadow inventory is out there? 

•     A minimum of 5,000 foreclosures have not hit the market.

•     Many unsuccessful loan modifications are expected to lead to foreclosures, while adjustable rate mortgages that will  reset this years, as much as doubling house payments, are expected to lead to more.

•     Homeowners, some in danger of foreclosure and some with so much negative equity in their homes that they are at risk of deciding to “strategically default” for economic reasons, will increase the numbers.

•    50,000 investors who bought up the foreclosure bargains with an eye to flipping for a quick profit rather than to acquire rental property could try to resell them at any time.

What is less clear to analysts is the impact.  Tom Rugg of the Information Market says he doesn’t even think “Phoenix’s shadow inventory will cause another crash, but the housing market’s recovery is going to take longer and will be more drawn-out than many expected.”  Other analysts are not so optimistic.  How many hit the market and when depends on what homeowners, banks, and investors decide to do. 

For more information about foreclosure alternatives or buy or sell a home in Phoenix, Mesa, Glendale, or surrounding areas, call Curtis Johnson Real Estate today.  One call will convince you that Curtis’s proven techniques will work for you.

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