John Rebchook is a former Rocky Mountain News reporter with more than 30 years of experience in writing and communications... There appears to be a “shadow” market of homes, both distressed and otherwise, that are not on the market yet, and could ultimately delay the housing recovery. A survey by Zillow.com in May, for example, found that 31 percent of those polled would consider putting their homes on the market, if conditions were better. That could lead to a flood, maybe even a tsunami, of new homes on the market. Also, it is widely believed that banks are not putting all of the homes they have repossessed on the market, as they hope for a better price.
Ed Jalowsky, owner of Hottest Homes Realty, said he is certain that a shadow market is looming.
“I think so,” Jalowsky told me. “Here is why. First of all, a lot of the financial and social economic indicators have not stemmed the flow of the hemorrhaging of job losses. Earlier this year, the unemployment rate was 7 percent and now it is hitting 10 percent. It already is 12 percent in California. And if California goes down the drain, so does the rest of the country. We don’t have any real economic news that things are getting better.”
And banks are loathe to complete the foreclosure process, because they figure that Uncle Sam might ultimately pay them 50 cents on the dollar for their loans, while they’ll only get 30 cents on the dollar in the open market.
“But Denver may be a bit counter-cyclical,” Jalowksy said. “We have been down this road longer than the rest of the country. We were way ahead of the curve for the downturn, and should be way ahead of the curve for the recovery.”
Lydia Lin, owner of One Realty Inc., said she has had several clients who wanted to put their homes on the market, but when she researched their neighborhoods to see what they could realistically expect to get, they decided not to sell them.
“No one wants to bring $20,000 to the closing table,” Lin said.
But a few clients have thrown in the towel, because they realize that it may be several years before they can expect a rebound. One client who moved to Washington, D.C., is getting set to put his house in Mayfair on the market. At one point, another Realtor told him he could get $730,000 to $750,000, but Lin said it probably will hit the market around $590,000. Unfortunately, he spent a lot of money renovating a house and didn’t spend his money wisely. It would have been less expensive, and a better investment, to scrape the house an add a basement, she said.
On the other hand, she plans to soon list a home near Sloan’s Lake for about $259,000, and she thinks it is possible bids will come in higher than that. The home has been appraised at $270,000.
“You can’t find anything from Federal to Sheridan for less than $275,000,” Lin said. “And I’ve seen some bungalows near Lowell (Boulevard) and 32nd Avenue sell for $400 per square foot. It’s all about supply and demand.”
Jack O’Connor, a owner of RE/MAX Professionals, said he doesn’t think there is a shadow market of foreclosed homes in the Denver area.
“A bank would have no reason to “hoard” homes priced in the $100,000 range, because they could put it on the market and probably immediately sell it for more than the asking price,” he said. “And for the expensive foreclosures, the banks are doing everything to work with the homeowners, because they are so difficult to sell.”
O’Connor said that what is perceived as banks keeping homes off the market is actually a case of under-staffed lenders just learning how to handle the record number of mortgages delinquent or in default. At th4e same time, more states have adopted rules and laws that are protecting consumers, “which elongates the front-end of the foreclosure process,” O’Connor said.
The so-called shadow market is not going to darken Denver’s real estate prospects, he said.
“The Denver market should continue to rise for the next 24 to 36 months. Denver is easily well beyond the bottom.”
Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865
John,
I tend to agree more with Jack for another reason not mentioned. We’re still seeing foreclosures coming on the market, and we’re handling a lot of short sales which is taking those properties off the market before they become bank owned.
The number of active listings in Denver has been steady for months, something very unusual for this time of year. We’re shaking out the inventory, and we should have room to add some more with the pent up demand we’re experiencing in certain price points. This is evidenced by the overall absorption rate of about 5 months.
We still have struggles in the high end price ranges, but we’re beginning to see the demand trickling up as the lower prices ranges get busy.
we have saw something similair in our market – but in the off season the inventory skyrockets