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Don’t Be Afraid of What Lurks in the Shadows

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The Wall Street Journal is doing a series of articles on the impact shadow inventory will have on the housing market. In the first article, Shadow Inventory: It’s Not as Scary as It Looks, they address why no one should be overly concerned:

“There are several reasons why the shadow inventory isn’t as scary as it sounds: It’s concentrated in a handful of markets—it isn’t inherently a national phenomenon. It is being offset by improved demand, particularly from investors.”

We could not agree more.

As we have explained in earlier posts, the demand for homes is definitely increasing and the excess distressed inventory will be confined to a small number of states. (However, in the states that do have larger supplies of shadow inventory, prices will continue to feel some downward pressure.)

Housing analyst Ivy Zelman probably put it best:

“Just like the Wizard of Oz, shadow inventory is not very intimidating once you pull back the curtain.”

That doesn’t mean that there should be no concern, just that it is not as big a challenge as some profess. As Zelman explains:

 “The bathtub is almost full, but the water has stopped rising, and we are most concerned with how fast it drains.”


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