Lisa Simpson
Mar 11,2010
In: Foreclosures

Shadow Inventories Waiting to Enter the Market

Winnetka has finally come under the gloom of foreclosures replete in all its fury with shadow inventories.

Winnetka has finally come under the gloom of foreclosures replete in all its fury with shadow inventories. One family exited from their foreclosed house and four days later a For Sale sign appeared. Their story reads like a novel dotted with black spots but with a miraculous happy ending.

The family comprised of two couples – the wives being sisters. They purchased their first house during the summer of 2006 by paying $634,000 for the two storey unit comprising of four bed rooms and a swimming pool. From the beginning there were signs of trouble as no down payment had been made. The loan was an ARM one or Adjustable Rate Mortgage.

Towards the close of 2008 the interest rate spiked and their monthly payments went up by double to $7,000 each month. It became beyond their means. They tried to get their loan modified and contacted their lender Wells Fargo. But the latter told them to stop making the payments and continue to stay in the house. The bank said they would be notified about when they were to exit.
It meant that the house became part of a shadow inventory for a good number of days. It is termed shadow because although the lenders seize the property they do not straightway put it in the market. The houses that are in foreclosure are also considered part of the shadow inventory.

There are no accurate figures about the number of houses hiding in shadow inventory either in this locality or across the nation. It remains unknown when these houses would enter the market.

However in this particular case the family of two sisters and their husbands finally ended with them remaining house owners. A time came when they exited from their house that had become unaffordable for them. They shifted to a new one that they had purchased in the same locality for an amount that was much less than what they had paid for the previous house four years back. The original house continues to languish with a For Sale sign.
Jobs are vanishing speedily but it is not as bad as it was one year ago; it is even better than one month previously. In February the number of job losses was the lowest since 2006. The companies informed that they would decrease workers by 42,090 as per the findings of Challenger, Gray & Christmas Inc. In February the decrease was by 41%. In January the number of losses was 71,482. It was 77% less than the 186.350 jobs that were cut one year previously – the time of the recession peak. In January 2009 it had reached its peak with the firms announcing 241,749 cuts in jobs. Since then the numbers have steadily dropped.