Florida's massive 'shadow inventory' of homes in limbo looms over housing market
Wake up and good morning. As if the Florida real estate market is not troubled enough, there's recent buzz over a study conducted by National Association of Realtors research economist Selma Hepp that examines the monstrous volume of homes that for various reasons are in limbo -- in need of being sold but not even on the Florida market yet.
Florida's so-called "shadow inventory" is a whopper, according to the NAR study. Florida ranks No. 1 in the nation with 441,461 shadow homes statewide, homes that are either bank repossessions, those with delinquent loans or ones in foreclosure that are not yet listed for resale.
California -- twice the population as Florida -- is in second place with 227,961 homes, followed by Illinois (121,226), New York (107,485), and Texas (93,761). Ouch.
The issue in Florida, Hepp says, stems largely from the sheer size of the foreclosure inventory and the lengthy time it takes for delinquencies to reach foreclosure. In contrast, states like Nevada and Arizona rank in the top three states for foreclosures but are 16th and 11th in shadow inventory because their inventory is moving faster through the pipelines and makes up a larger share (55 percent in Arizona and almost 70 percent in Nevada) of all home sales. Read more on this from Mortgage News Daily.
Here's a good point. The volume of shadow inventory is less of a problem than the length of time it will take before those homes are cleared. "Until that happens," Mortgage News Daily notes, "they will continue to exert downward pressure on prices and increase the marketing time of non-distressed properties."
Translation? Florida home prices will continue to trickle south until this bulge of housing inventory currently not on the market finally gets absorbed by home buyers. But there is a silver lining, of sorts. In the NAR study, it is not Florida that will take the longest to rid itself of this overhang. The leader? New Jersey, which may need as long as 51 months -- more than four years -- to rid itself of its inventory.
A Palm Beach Post story over this past weekend explored the shadow inventory crisis. The article quotes Tim Becker (photo, left), director of the University of Florida’s Bergstrom Center for Real Estate Studies. "That cloud just keeps hanging over us," Becker states. "The question right now is: When will the homes come on the market and over what period of time?” Becker also states that Florida’s shadow inventory is so much larger than other states’ because of the rampant real estate speculation that occurred during the boom, as well as the state’s judicial foreclosure system. Florida requires every foreclosure go through the courts, which have a 322,724-case backlog of foreclosures.
As Becker tells the Palm Beach Post: "There are only so many cases you can do in a day, only so many you can process."
-- Robert Trigaux, Business Columnist, St. Petersburg Times