For years after the foreclosure crisis of 2008 and 2009, everyone expected a huge surge of “shadow inventory” properties to flood the market. This never happened, and will likely not happen.
Shadow Inventory includes all the properties held by banks after foreclosures, properties with pending foreclosures b/c of late payments or no equity, and properties held by sellers waiting for the market to come back.
What happened? A combination of gov’t policy and market adjustments actually worked to bring back prices and prevent this surge of inventory from coming to market.
Loan modifications, HARP refi’s, cash buyers, appreciation (spurred by low rates), and other government programs nursed the housing market back to relative health.
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