Shadow Inventory in Maryland

What is meant by the term “Shadow Inventory”?

The shadow inventory is the number of homes that are in some stage of foreclosure but haven’t been placed on the market. The term includes homes in which the homeowner is 30 to 100′s of days delinquent to homes that are in a short sale status, and bank-owned properties that are not for sale.

According to Realtytrac.com the number of homes nationally in foreclosure is 1 in 563, with the top 5 states of CA, FL, MI, IL, and AZ accounting for more than half the foreclosures. Maryland’s foreclosure rate is 1 in 1954, and Frederick County is 7th in the state with a rate of 1 in 1594.

Maryland’s Shadow Inventory

Because of last year’s “robo-signing” scandal, (major mortgage servicers discovered that employees were systematically cutting corners in the foreclosure process, signing thousands of false or incomplete legal documents each day) As lenders learned more about it, man put a temporary stop to their foreclosure process, setting off a year-long slowdown of foreclosures. This is why today, there are only 31 foreclosed homes on the market in Frederick County, down significantly from a year ago.

The only problem with putting a freeze on the foreclosure process is that it just puts off the inevitable. Maryland’s shadow inventory is about 24 to 36 months. We’ll probably be seeing those homes coming to the market in 2012.

We expect banks to continue to release bank-owned properties to the market at a steady pace, as they’ve done since this melt-down began, otherwise a flood of foreclosures on the market would be certain doom for the housing market.

Predictions Concerning Shadow Inventory:

Many 3rd party sources are weighing in with prognostications concerning Shadow Inventory:

Foreclosures in Frederick

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We’ve recently seen more banks get on-board with processes to make short sales more streamlined. We believe that more homes will be sold through the short sale process than in the past, mitigating against the doom-and-gloom forecast of many who interpret these statistics. We see opportunity to buy greatly discounted houses in better condition than foreclosed homes. Read more about Short Sales.

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