Shadow inventory clogging market and offering few options for buyers

The inventory of distressed properties has clogged the housing market and pushed down home prices and values. But despite the surplus of affordable housing available to homebuyers, many are struggling to find attractive properties to purchase.

The Miami Herald recently reported that the ever-increasing shadow inventory of foreclosed properties stands to suppress a housing market recovery for the next few years. The largest U.S. mortgage lenders have also slowed down their foreclosure processing to make sure they do not repeat illegal practices that occurred between 2009 and 2010. Once the review of these foreclosures is complete, a new wave of distressed properties is expected to hit the market.

The news source says shadow inventory can be broken down into three categories: properties lenders have repossessed but not put up for sale, properties caught up in the foreclosure process and properties that are severely delinquent in loan payments but are not in the foreclosure process yet.

The Wall Street Journal reported that buyers are not complaining about the low mortgage rates or affordable home prices. Rather, the low inventory of appealing properties is creating a stagnant market. Homeowners are opting not to sell their homes for low prices, thus the houses available in the market are in poor condition.

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