Where Is the Shadow Inventory?
For months I have heard talk about the “shadow inventory” the banks are hanging onto which leaves many people believing that the real estate market may take another dip. I certainly am not the expert to answer the questions about this topic as the banks have not confided in me nor let me look at their books. There may be some truth to this, yet the truth might be that hedge funds and large investment groups are buying bulk real estate directly from the banks.
Here are a couple of examples:
- The Blackstone Group spent $2.7 billion last year to buy 17,000 single family homes, post-foreclosure, around the United States and plans to continue ramping up those efforts in 2013
- Pine River Capital Management took real estate investment trust Silver Bay Realty Trust (SBY) public in December. Silver Bay, which acquires, renovates, leases and manages single family homes, has already purchased more than 2,500 homes in areas hard hit by the housing crisis. In a recent SEC filing, Silver Bay said that it plans to purchase 3,100 more homes.
These companies may sell some of the properties, but many will be held as rentals until the market appreciates and their returns will be much higher.
Fannie Mae has two programs for investors to purchase in bulk:
- Pool Sales – A pool sale allows investors and public entities to purchase multiple Fannie Mae properties in one transaction
- Structured Sales – Structured sales program involves significant sales of real estate assets in the form of either pool sales or joint venture transactions. Any structured sales under this program are expected to be significantly larger than pool sales
If there really is shadow inventory – it would be welcomed if it was released because our markets like many across the country are experiencing a shortage of homes to sell. Now there are plenty of buyers with money in their pockets with nothing to buy.
Filed under: Real Estate
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