“Shadow Inventory” Of Houses On The US Market - A Threat?

Here’s an interesting link to a story that appeared in a California paper.  The story talks about the possibility of a “shadow inventory” of houses on the market. The implication is that banks that have foreclosed on properties are not selling the real estate as they are reluctant to take the hits to their financial statement by selling the property for a big loss. This would reduce their equity capital and mean that they might be forced to raise more money.

Also, it means that prices might have further to fall as the “months of inventory” is really a fictitious number. That number doesn’t include the “shadow inventory”.

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