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Is There Really a Shadow Inventory?

Posted by Zach & Mas Roberts on Monday, December 16th, 2013 at 10:45am.

Las Vegas Shadow InventoryIs there really a shadow inventory in the Las Vegas real estate market? If so, when will these properties be released to the market? What will happen to prices when/if it happens?

As real estate agents, these are questions we are asked almost every day, and a number of buyers have stated they are waiting until prices "go back down" before purchasing.

But will prices go down? Prices skyrocketed during the boom and then plummeted below pre-boom levels during the recession. Las Vegas has seen appreciation of 30% over the past year due to low inventory, but we are not quite yet back to pre-boom pricing yet., and experts feel that prices will continue to rise slowly until they reach this level again. (Before the boom, the prices of homes for sale in Las Vegas hovered consistently right at the national housing median.) Many buyers who decided to "wait" have already been priced out of the market. Below are excerpts from an article in the Las Vegas Review Journal addressing this subject:

Excerpt 1

Economist pokes holes in 'shadow inventory' theory

By JENNIFER ROBISON
LAS VEGAS REVIEW-JOURNAL

Shadow housing supply? What shadow housing supply?

A North Carolina-based economist with Wells Fargo Securities dropped a surprise on the audience during a Thursday housing forum at The Orleans when he called the potential for a big inventory of empty or repossessed homes waiting to flood the market a “phantom idea.”

Eugenio Aleman said shadow supply simply doesn’t exist in “markets that work.”

“And the market is working now. Everyone who wants to sell their home is selling their home,” said Aleman, a speaker at the Nevada Housing Forum, put together by the state Department of Business and Industry and UNLV’s Lied Institute for Real Estate Studies and Lee Business School. “I do 160 presentations every year in across the U.S., and everybody has the same issue: There are no homes for sale. And that is the reason prices are skyrocketing. If you’re waiting for shadow inventory to hit the market, don’t, because it’s not coming, according to my analysis.”

Excerpt 2:

Aleman discounted the idea that banks would sit on homes rather than put them on the market.

“If a bank doesn’t want to put a home on the market, it would have to go out of business because if you hold a home, the home loses value every day,” he said. “It’s ludicrous to think banks will hold too many homes. Banks are not in the business of holding homes. They lose money, and banks don’t want to lose money.”

Excerpt 3

Luis Lopez, data analyst for the Lied Institute, said Nevada’s supply of homes with mortgage payments that are at least 90 days late has plummeted from a peak of 90,000 in 2010 to 37,000 today. The ranks of homes in foreclosure have fallen from 40,000 in 2011 to 17,000 now.

To read the entire article, click here. Then let us know what YOU think!

Mastura Roberts
(702) 710-3330
offers@greatlasvegashomes.com

Team Leader, The Tonnesen Team
Berkshire Hathaway HomeServices, Nevada
3185 St Rose Pkwy #100 Henderson, NV 89052

With over 30 years of experience helping families call Las Vegas "home!"

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