Daytona Beach and Shadow Home Inventory

A recent article on RealEstateChannel examines the term "shadow inventory" which many real estate market forecasters feel will affect our Florida foreclosure numbers for years to come. Author Kevin Brass explains, "Recent debate focuses on a report from Standard & Poor's, which suggests that it may take three years to absorb the current shadow inventory of distressed properties. More than $480 billion property falls into this category, which Standard & Poor's defines as 'outstanding properties that are (or were recently) 90 days or more delinquent, in foreclosure, or real estate owned (REO), but haven't yet hit the market inventory.'"

In our Daytona Beach area, we have higher numbers of foreclosed properties than in many parts of the country. If all of these homes entered the market at once, definitely they would impact pricing and supply vs. demand. But if we look at the numbers, the shadow inventory may not be as much of a problem as it seems.

Brass states, "For one, the size of this shadowy inventory is, in fact, shadowy. Nobody really knows how big it is, with estimates ranging from 2 million to 8 million homes. That's a big difference, and it's worth noting that many of the owners who fit Standard & Poor's description may not end up putting their homes on the market. And Standard & Poor's report makes it clear the problem differs wildly from market to market. In New York, for example, the analysis estimates there is 103 months of supply in shadow, light years ahead of the 34-month national average. In contrast, Phoenix, the lowest of the 20 markets studied, showed only 16 months of inventory.

"In fact, in many markets the inventory of publically available properties is shrinking. In Miami, for example, the number of residential listings in May was down 19.3 percent from a year earlier and 43 percent below August of 2008. Nationally, total inventory was down 3.4 percent in May, according to National Association of Realtors data.While the spring numbers were certainly skewed by consumers rushing to buy before the expiration of the federal tax credit, they don'suggest that there is a flood of listed property lingering on the market."

Another point Brass makes is that the distressed properties making up the shadow inventory are not all the same type of home. In Daytona Beach, we have condos, and single family, and waterfront, and golf course, and attached homes. Many foreclosures are homes which have not been taken care of, and the prices when these sell will not affect the Daytona Beach high-end home market.

Brass concludes, "Standard & Poor's looked at the national shadow inventory numbers and issued a stern warning, part of the new-found hard edge adopted by the ratings agencies in the wake of the mortgage crisis. 'Given this backlog, we believe that average home prices could fall again if demand doesn't rise in step with the potential influx of supply,' Standard & Poor's credit analyst Diane Westerback said in a statement.

"But that's a big 'if.' A reasonable uptick in demand--fueled by, say, low interest rates and tax breaks--could easily offset the impact of the distressed properties, opening the possibility that the shadow inventory may turn into the equivalent of a dangerous hurricane that never hits land."

For a detailed analysis of your Daytona Beach property, call or email. I'm a specialist in short sale and distressed properties, and certainly can advise you on the shadow inventory of Daytona Beach.

Sherry Armstrong, Realtor
386-679-3191
yourkeytothebeach@gmail.com
www.sherryarmstrong.com
www.ormondbeachscene.com