Miami’s Shadow Inventory

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Today’s headline in the local Miami business journal read “Judge grapples with her discovery of 15,000 unserved foreclosure cases.” I also read an article on CNBC.com titled “Rebound In Housing Hampered By Slowdown in Short Sales.” So what is the story here?

According to public records, in Miami-Dade County there were 26,731 foreclosures filed in 2007, another 56,656 foreclosures were filed in 2008, and an additional 29,833 foreclosures have been filed through May 2009. That’s over 110,000 foreclosures filed within the past two-and-a-half years! We have a HUGE shadow inventory of foreclosed properties out there that very few people in the real estate business want to acknowledge, let alone share with the general public.

I keep wondering where are all these bank owned properties? I think there is only one explanation. These thousands upon thousands of distressed properties are being held on the banks balance sheets. TALF, TARP, stimulus, mark-to-market, call it whatever you wish, but the banks are playing a simple game with the market, and apparently, the FDIC, Federal Reserve, OTS or Comptroller, have nothing to say about it.

So let’s consider some additional facts. According to the Southeast Florida Multiple Listing Service, since January 2008 there have been a total of 22,583 properties sold in Miami. Out of this number, there were only 6,624 bank owned or REO properties sold, a mere 28% of total sales.

Now in all fairness not all foreclosure filings ever end up in a foreclosure sale. There are many that are modified, some are sold in pre-foreclosure, many are caught up in legal snafu’s, a few are dismissed, many have not been served or processed, but c’mon, where are the other potential 50,000 plus bank owned properties that should be on the market?

Yes, I am in the business of selling real estate, but I also like to work and make decisions based on facts and reality. Do you know how many times I have heard the same story lately, “we have multiple offers, send us your highest and best offer?”

The banks are playing the real estate market, and so far they have clearly earned the gold medal.

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