While the housing recovery is certainly underway, “the shadow inventory remains a threat to the speed of the housing recovery,” according to Reuters’ Rhonda Shaffler.
Shadow inventory “refers to distressed homes that are somewhere in the foreclosure process.”
It includes homes that are seriously delinquent, or ones that the banks have already repossessed but haven’t put back on the market for sale. And there are currently anywhere from 2.3 million to six million homes in the shadow inventory.
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The idea is that much supply could end up depressing prices.
There’s a way to keep this shadow inventory from stalling the real estate recovery, though.
As Louis Basenese has suggested before, “We should force banks to turn their foreclosed properties into rentals. After all, the rental market is suffering from too much demand and not enough supply. So we can solve two problems – too many homes for sale and not enough homes for rent – in one fell swoop.”