There has been a lot of speculation about the potential impact of coming 'shadow inventory' on the real estate market… that is, homes that are 90 days delinquent, in foreclosure, bank owned (REO) but not yet on the market, or 'cured' but expected to default.
A recent analysis of 'shadow inventory' published by Standard & Poor's Ratings Services shows big variations in the top 20 markets… ranging from a whopping 103 months supply in New York City to a low of 18.5 months in the metro Phoenix area. Nationwide, they estimated it will take an average of 34 months to sell those homes at the current rate of liquidation.
Our Minneapolis metro market is on the lower end of the range, with a 23.5 month supply. We appear to be one of eight markets whose 'shadow inventory' peaked in late 2007 and early 2008.
Markets that appear to be past their peak are: Phoenix, Las Vegas, Miami, Los Angeles, San Diego, San Francisco, Minneapolis and Washington, DC.
Markets that appear to have peaked but aren't receding are: Portland, Seattle and New York City.
Markets where shadow inventory is peaking and may still be headed up include Atlanta, Boston, Dallas and Denver.