What is “shadow inventory” and how is this going to impact home values in 2010? These are properties that are not yet currently on the market but potentially will be coming to market in 2010. Such properties include:
* houses taken overby banks and mortgage companies
* houses where the loans are at least 90 days delinquent (over 99% of these will become distressed properties that will be up for sale)
* houses whose sellers have waited for the market to improve
According to a recent Standard and Poors report, the existing foreclosure inventory pales in comparison to the number of homes about to come to market as distressed properties. In fact, the number of homes that are about to become distressed properties is 31 times greater than the number of homes currently on the market in that category!!
These liquidated properties provide the market with a supply of homes for sale. Home prices directly reflect the relationship between the supply and demand of properties for sale. Prices will remain level if a comparable increase in demand accompanies an increase in supply. Otherwise, an increase in supply will result in a decline in prices to attract demand.
Jay Carden
RE/MAX Properties, Inc.
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