A friend of mine at RE/MAX Properties posed this question to me yesterday, “does Colorado Springs have a ‘shadow inventory’ problem?” and it really got me thinking. First of all, for those not familiar with this real estate industry term, ‘shadow’ inventory refers to homes usually owned by banks, that are not being offered for sale yet, but probably will be before long. The existence of a ‘shadow’ inventory of homes for sale is a hard one to prove, but I did a little snooping, and here is what I found.
- There are 173 single family or patio homes for sale in Colorado Springs that are currently disclosed as Bank Owned of some sort or another, out of 4,352 active listings of homes for sale, or less than 4% of the Colorado Springs homes for sale. There are 181 out of 1450 Pending transactions, or 12.5% of the homes under contract. One theory is that these homes take so much longer to close, that they are disappearing from the market, but not showing up in the closed statistics.
- In a preliminary spot check of homes owned by Wells Fargo, Bank of America, US Bank, and Household Finance (a random list), it appeared the only homes that were not showing up as for sale, were very freshly foreclosed upon, indicating that there is not a significant pool of ‘shadow’ homes for sale.
- In checking the number of actual foreclosure sales vs foreclosure filings, it would appear that the number of foreclosure homes on the market is fairly well balanced to the number actually being sold in foreclosure by the public trustee. Some foreclosures result in the bank taking ownership, but many are bought by investors. In addition, some foreclosures are not single family homes, and so are not material to the issue.
My conclusion? While we don’t seem to have a lot of foreclosures for sale in our inventory of homes for sale, they do not appear to be getting taken by the banks and held, therefore we probably don’t have a shadow inventory problem.
My own theory is that we have homes that may have begun the foreclosure process, but the banks are moving very slowly to actually complete it, granting homeowners more time to sell the homes (ie short sales), doing workouts, or simply delaying taking the property to sale (and therefore taking title), waiting for a better market. The fact that there were 207 withdrawals and 365 new filings (56.7%) would indicate that the banks are doing something to avoid owning all these homes.
For more information on foreclosure statistics in El Paso County, visit the El Paso County Trustee web site.