It will take nearly three years for the Washington area’s pent-up delinquent and foreclosed properties to clear, according to a recent report, casting a pall over the region’s housing market.
The area’s 34.2 months of inventory is in line with the national average, said the report from Standard & Poor’s. The New York-Northern New Jersey-Long Island market had the highest inventory level, at 103.1 months.
Analysts have kept a close eye on the so-called “shadow” housing market, which is comprised of homes that are delinquent or in foreclosure but have not been put on the market.If banks or lenders release them too soon, home prices could crash; if they hold on to them too long, supply could dry up. A standard level of inventory is about 19 or 20 months.
“The longer the overhang … the longer it is until the market returns” to a healthy level, said Diane Westerback, managing director of Global Surveillance Analytics for Standard & Poor’s.
The area’s 34-month inventory is up about 22 percent from six months ago and about 36 percent from a year ago, but is still well off its high of nearly 60 months about a year and a half ago, the report said.
The report defines “shadow inventory” as properties that are, or were recently, 90 days or more delinquent on mortgage payments, in foreclosure, or real estate owned that are not yet on the market.
“It’s hard to say exactly how these things get liquidated,” she said. “Inevitably they’re going to get spread out a bit.”
David Dowies, principal broker at Portfolio Realty, a real estate firm based in Northern Virginia, said he has seen the properties “starting to trickle out” back onto the market.
Lots of clients want to sell, he said, but short sales and foreclosures that have pushed prices down have given some of them pause.
“There’s just a lot of people on the sidelines — sellers — that have been holding back,” he said.
