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Ed Fuller: Can Shadow Inventory Alleviate the Shortage of Homes for Sale?

Ed Fuller
Ed Fuller

National Association of Realtors chief economist Lawrence Yun points out in a recent article that home price increases over the past two years have reduced the number of underwater homeowners (the value is less than their loan balances) in half, but there are still about 6 million homes at risk of default. About 2.3 million of these are already seriously delinquent or in foreclosure.

In California, the reduction in seriously delinquent mortgages has been dramatically reduced, from a rate of 12.5 percent at the peak to 3.6 percent now.

Last year, of the 1,210 single-family homes that sold in the metropolitan Santa Barbara area, 41 were bank-owned foreclosures and 72 were short sales. This would be 3.4 percent bank-owned sales and 6 percent short sales or a total of about 10 percent of last year's sales where distressed.

Currently, there are four active bank-owned single-family listings and three short-sale listings out of 275 available. According to a search of South Coast ZIP codes, there are 159 properties of all types that in are pre-foreclosure or noticed for auction.

If all those homes had come on market and sold last year, they most likely would have only been around 10 percent of the sales. Hardly enough to significantly affect our market.

Concerns of shadow inventory in our area are unwarranted, and the increase in inventory they might bring is illusory.

Ed Fuller is a real estate broker with San Roque Realty Inc. and president of the Santa Barbara Association of Realtors. Contact him at [email protected] or 805.687.1551. The opinions expressed are his own.

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