Banks Sitting on Foreclosed Homes

Here’s an interesting piece from the San Francisco Chronicle reporting on a “shadow inventory” of foreclosed houses — possibly 600,000 nationwide — that have not been placed on the market.

Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.

Is this a way of controlling market prices? With so many high-impact community development initiatives being implemented as a means to stabilize communities hit hard by high foreclosure rates, how do we read statements like those from Rick Sharga, vice president of RealtyTrac, who says that “it could be disastrous if the banks suddenly flooded the market with those distressed properties. You’d have further depreciation and carnage.”

Isn’t there opportunity here? Are the banks simply dealing with unprecedented volume? Let’s weigh in.

Matthew Brian Hersh served as senior editor at Shelterforce from March 2008 to October 2012. He studied English at Rutgers University and has spent his professional career in journalism, policy, and politics.


  1. This article is weird—it assumes that properties that haven’t sold are not on the market. I guess that’s a California perspective for you. In other places, of course, some properties aren’t resold because no one wants them.

    But I think there still is be a shadow inventory. And the arguments I’ve heard for why are:
    (1) The assets are worth more on paper than they would be if sold, making banks looks more solvent
    (2) They’re waiting for the government to buy them up at better prices
    (3) They don’t care about selling them—the $ interest in foreclosing was for credit default swaps or insurance, not the pathetic, overvalued collateral.

    Creepy, eh?


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.