The inventory of future short sales and foreclosures which will be coming to the market is known as ˜shadow inventory™. Future real estate pricing will be determined by the number of these distressed properties which eventually reach the market.These properties sell at major discounts: § short sales at a 10% discount § foreclosures at a 35% discountCoreLogic just reported this inventory is declining as more Americans are staying current on their mortgage obligations. Here is a graph from their latest report:
Bottom Line
There still are a substantial number of distressed properties that must be cleared. They will cause prices to soften in many markets. However, it is comforting that this number is finally begining to decline.