Residential Supply and Demand

Shadow Inventory

Posted on Wednesday, June 23, 2010

According to S&P shadow inventory has been growing in almost every area over the past 5 years. The backlog will take an estimated 3 years to clean out. This includes loans more than 90 days late. The original principal balance for these loans is thought to total $480 billion (30% of the private label non GSE market). That said, prices may drop again as this supply is added to the market if demand does not pick up. Inventory varies greatly by area. Metro NYC is thought to be one area where shadow inventory will take the longest – 103 months – to clear, The national average is 16 months. The recent Fed Beighe Book supports the suspicion that shadow inventories are being held by banks, particularly in NY, Cleveland, Atlanta and Chicago.

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