The last five months (Oct 2010 – Feb 2011) we’ve seen the following number of distressed sales in Arlington: 26, 19, 10 ,10 12, and 18. That accounts for bank-owned properties on the market and short sales sold, not properties bought or sold at auction. The properties sold at auction that are not bought by a 3rd party, are bought by the bank who owns them….the property in effect reverts back to the bank, going from a foreclosure auction to a bank-owned property. The big discussion lately has been about “shadow inventory,” the properties that the bank already owns, but has yet to release for sale on the market. How many houses do they actually have? How will that affect our real estate market?
Rather than flood the market with the bank-owned homes, which would likely cause a deep cut in our average sale price, the banks are slowly releasing the houses every month. According to a report by the economists with the National Association of Realtors(R), they predict the state of Virginia to have about 14 months worth of inventory still waiting to be sold:
NAR reports their metholody as:
The months’ supply is estimated by dividing the shadow inventory and the monthly number of distressed sales…When looking at months’ supply it is important to keep in mind that this estimate highly depends on saturation of distressed sales. Given that New Jersey over the past year on average reported about 20 percent of existing home sales to be distressed sales, it will take a longer period for the shadow inventory to clear.
What does this mean? We need to sell through the remaining inventory before we really see prices increase. We’ve already hit bottom, about 2 years ago, so I am not worried about a LOCAL double dip…our local market is too strong.