We hear the term “shadow inventory” referenced frequently in the media. People continually want to know, “how much exists?”, and “is it a problem?” But what we don’t often hear is a number, or the answers to those questions.
Recently, Steve Schiller, President of Northern Nevada Regional Operations for Ticor Title of Nevada, was asked to give a presentation of the 2013 Residential Forecast for Washoe County. As part of his presentation, he was asked specifically to address and estimate the amount of shadow inventory in Washoe County.
I attended Mr. Schiller’s presentation and was impressed with his attempt at quantifying a concept that until now I had seen only a few take a guess at. Mr. Schiller prefaced his presentation by saying that his calculations, too, were only an estimate; however his analysis was the most thorough I have seen, and seemed to make sense.
Mr. Schiller has provided the slides from his presentation to me and allowed me to share them with the readers of this blog. [Thank you to Steve Schiller and Ticor Title] The presentation slides along with accompanying notes can be found here: Washoe County 2012 Residential Review ~ Shadow Inventory ~ 2013 Residential Forecast
To determine shadow inventory Schiller looked at three components of the potential shadow market:
- loans that are in some stage of the foreclosure process, which means, the lender has filed the NOD but has not completed the foreclosure, by crying the sale.
- loans that have been foreclosed, but the lender has not resold the property. Typically this would be the vacant properties held by the banks that for various reasons have not been put back on the market. Or, REO inventory not yet listed.
- delinquent loans that have not even started the foreclosure process, primarily due to government intervention, for example, AB284 & National Mortgage Settlement.
What followed were calculations that ultimately lead to an estimated shadow inventory equivalent to a 17-months supply.
Take a look at his approach and numbers. What do you think? Does 17 months sound realistic? Too high? Too low? I would love to hear your thoughts. Steve Schiller is also interested in hearing your feedback.