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Market Updates

The Shadow Inventory (You Haven't Been Hearing About)

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shadowFor months, I have mentioned in passing the potential impact the so-called “shadow” inventory might have on (i) the housing recovery and (ii) residential investors in general.

While everyone knew this inventory (comprised of homes with loans more than 90 days past due that have not been foreclosed and are not on the market) existed, it was unclear as to its size...

...until now.

Now, thanks to the Inspectors General of the Federal Housing Finance Agency (FHFA) and the Department of Housing and Urban Development (HUD), we have some idea as to the size of the shadow inventory and the threat it poses to the soundness of Fannie, Freddie and HUD.

According to their joint report, 2.7 million homes comprise the shadow inventory. For every REO property in the Fannie/Freddie portfolio, there are more than six homes in the shadow inventory. For HUD, the ratio is 20 to 1 in favor of shadow properties.

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