Release the Shadow Inventory

As many of you know I was on vacation last week.  When I returned to work yesterday I was struck by the lack of new real estate inventory in El Cajon.  There are currently 282 single family detached homes for sale in all of El Cajon.  If I search for a property under $300,000 there are only 89 properties.  I am currently working with 14 buyers in this price range.  When I start narrowing the search by specific area of El Cajon, number of bedrooms needed, and the required condition needed to satisfy an FHA loan, there is really not much to choose from.  Yesterday more listings went into contingent or pending status than came on the market.  Which shows the inventory is continuing to shrink.

We have all heard the media discuss the "shadow inventory".  Much of the shadow inventory is comprised of homes that the banks have foreclosed on and now own.  Recently there has been discussion on the banks renting these properties rather than flooding the market.  Renting these properties is not the way to go.  This will just put off the selling process and slow the recovery.  The banks need to start releasing the properties they have so the buyers can take advantage of the low interest rates and have a better selection of properties.  I am not saying they should flood the market and drive prices down but they should increase the number of properties they currently have on the market to come in line with the demand.  What are they waiting for?  Are they dripping the properties onto the market to try and drive up the price and make themselves more money?  This is not going to work.  Buyer's right now are willing to wait for the right property.  They are aware the banks are sitting on a ton of properties that at some time will have to be sold.  By not releasing more of the inventory they hold, the banks are simply forcing the real estate market to become stagnent.  They need to remember they are in the business of lending money not property management.

The banks are also selling properties in bulk as opposed to listing the properties on the MLS where most families and individuals purchase homes.  This practice excludes regular folks from being able to have access to the properties the banks own.  Investors can purchase these bulk holdings but not people looking to buy their first home.  This makes it even more difficult for a buyer to find a home. Many times when an investor buys the properties they become rentals rather than owner occupied homes.  This can negitively effect the community.  Some investors are starting to flip these properties, meaning rehabing the properties and then reselling.  They are sold at a higher price once they are updated and many times the property is then priced out of reach for a first time buyer.

Most agree that now is a great time to buy.  Prices have come down to a reasonable level, interest rates are at an all time low.  The home affordability is at it's highest level in years.  But yet there are so many who want to buy but can't because there is not much inventory on the market.  The banks need to release some of the shadow inventory.  Let's allow the market to recover and get these properties sold to individual owners.