You may have heard a lot about Shadow Inventory from the top real estate and financial analysts, who are predicting a less than stellar real estate market for the next few years. From what I can see here in Fairfield County, we are caught up in its backlog as well.
The increasingly common term describing our real estate market is "Shadow Inventory", and it refers to the houses that will be on the market predominantly due to one of the following: they are pending foreclosure, homes that have already been foreclosed and not yet sold, properties that are caught in the clogged foreclosure process, and lastly- homes that owners are delaying putting on the market until prices improve. Shadow inventory creates uncertainty about the best time to sell (for owners) and will dictate when a local market can expect full recovery.
None of this even takes into account the homes that were listed on the market and didn't sell during the listing contract, and those homes will also come back on the market at some point, too.
According to the National Association of Realtors, Arizona, California, Florida and Nevada account for 42 percent of the nation's foreclosure inventory today, and Florida tops the list with over 441,000 properties. It is estimated that this type of inventory in Connecticut exceeds 26,000 homes.
There are approximately 3.5 million houses for sale nationwide, but millions more are not on the market yet, and may not be for months, even years. Standard & Poor's estimates that the shadow inventory of homes is worth $405 billion nationally and estimates that the inventory will take four years to clear.
According to the GFC-CMLS, which may have up to a 30-60 day delay in reporting, there are currently over 10,200 properties in distressed status in Fairfield County alone, while less than 940 are bank owned. That's an awfully large backlog of properties that is going to take some time to sell.
The hardest hit areas in the twenty three towns and cities in Fairfield County are its four most populous communities. Bridgeport, Stamford, Norwalk and Danbury comprise over 6,400 or nearly 63 percent of the looming inventory. Also just as troubling is that just over 600 properties are showing current ownership by banks or financial institutions. It appears that we have a long, long way to go before this gets corrected and the market can return to some state of normalcy.
The Fairfield County towns with the fewest foreclosures and amount of Shadow inventory in the wings are Sherman, Easton, Redding and Darien with a four town total of 240 properties either in some stage of foreclosure or bank owned.
The fact that 90 percent of these homes have not even hit the market yet is cause for concern over the next few years. Even though interest rates are at all time lows, credit has tightened for the few buyers that are out there and wanting to purchase. These current conditions of the real estate market are not leaving us anytime very soon, and unfortunately may, in fact get just a little worse before it gets better.
SEE UPDATED ARTICLE ON SHADOW INVENTORY DATED 3/15/2012
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