The Shadow (Inventory) Knows

Recently there have been signs that the Bay Area Real Estate market has seen small signs of recovery as sales increased and other factors like interest rates have remained low. But a San Francisco Chronicle Story that ran yesterday on shadow inventory is a bit scary to think that less than two-thirds of the inventory has been sold. By the way this article is well worth a read and look at the chart.

Alameda County’s inventory has the second lowest turnover of foreclosure sales with 58.6% resold and 41.4% unsold foreclosures according to MDA DataQuick. The Bay Area as a whole has seen just 65.5 percent of the foreclosed resold. The DataQuick study looked at  all Bay Area homes repossessed by banks in an 18 month period ending January 2009. They tracked how many of those homes had resold by mid-March.

This means that the foreclosure inventory has been depressed by the banks. There could be many reasons, but the two that come to mind is they:

1. Can not handle the inventory they have received and are just slow to process
2. They do not want to further depress the market and be forced to take even bigger losses on the loans

Since Alameda has seen relatively very few foreclosures, the immediate impact may not be that great, but regional this could have a huge effect. If other like communities continue to see declining prices as inventory grows home buyers may opt to live in more affordable communities.