The Shrinking Shadow

During its peak in 2010, more than 14% of all home mortgages were in “Shadow Inventory,” homes that were either delinquent in their mortgage payment (over 10% of all mortgages in Q1 2010) or at some stage of the foreclosure process.

Investor Intelligence - The Shrinking Shadow

Industry analysts predicted these homes would hit the market in a flood of deeply discounted listings, putting downward pressure on all home values for a decade or more.

Recently released industry data however shows these dire forecasts have not come to pass. Assisted by historically low housing starts, the Shadow Inventory is gradually contracting, and are selling at higher than expected prices.

Coupled with the reduction of loan delinquencies (a topic we will cover in the next Investor Intelligence), it seems safe to say the Shadow Inventory will not have the impact that was originally feared.

The news from the housing market is hardly good, but it seems to be less negative, even at times positive. This is a material change from 2 years ago. We will continue to monitor these numbers and share our thoughts in the coming months.

Keep in mind as the housing market improves, it reduces rental supply and increases the overall health of the economy – both good things for the multifamily market.


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