Mike Orr’s latest real estate update mentioned a new Cromford Report chart for the Phoenix Real Estate market so that we can track “shadow inventory”.
The chart shows that the “shadow inventory” has been declining since November 2010 and is relatively small compared to the monthly sales rate. Of course successful short sales contribute to this decline in the “shadow inventory”. We did not include loans that are delinquent but not in foreclosure in our graph, but instead we recommend an expert on these: Jay Brinkmann, Chief Economist of the Mortgage Bankers Association. You can find his press release on 1Q 2011 delinquencies here.
Shadow inventory for the Phoenix Metro area has been declining, and at a much faster rate in the past several months. From around 50,000 properties to about 38,000. Still a significant number, yet with over 10,000 homes selling last month and well over half those being distressed (bank-owned or short sale) properties, the numbers could continue dropping rapidly. Since March 20101, the Phoenix market has seen a 25% reduction in REO inventory.
Now, to take a quick look at each of the Scottsdale sub-markets, by zip code.
South Scottsdale 85257 – Big drop-off in shadow inventory, especially in the past four months. From a high of over 275 properties to a current inventory of about 200 units, equating to somewhere just over a 25% reduction.
Downtown Scottsdale 85257 – Very low inventory of distressed properties. From about 160 homes in April down 125 in July. A 20% drop.
Central Scottsdale 85250 – Huge drop-off in REO inventory since November 2010. From a high of 120 properties in January to just over 60 in July. Almost a 50% reduction in shadow inventory!
North Central Scottsdale 85258 – Again a drop-off from about 125 units in February to about 90 in July. Almost a 30% drop.
Cactus Corridor, Scottsdale 85254 – A much higher volume of REO inventory can be found here. Still a similar drop-off is seen. From almost 475 units in November 2010 to just under 350 units today. A 25% reduction.
Scottsdale Airpark 85260 – From a high of almost 275 units in February to a current level of under 200 properties. Another big drop of almost 40% in REO inventory.
North Scottsdale 85259 – A bit slower recovery here, with a peak in February through April of about 200 homes, dropping to 150 in July. Still a drop of 25%.
North Scottsdale 85255 – Not nearly as much change here as in the areas further south (and typically lower priced). From an inventory that’s consistently been in the range of 375 properties, a small reduction to 340 units was seen in July. A minimal reduction of under 10%.
North Scottsdale 85266 – A bit of an improvement here. From a peak of about 130 distressed homes to 110 in July. A 15% reduction.
Far North Scottsdale 85262 – More decrease in REO inventory here, too. From about 220 units in late 2010 to about 140 in July 2011, a 35% drop.
Besides the rapid decrease in shadow inventory in the Scottsdale real estate market, you’ll notice that Scottsdale really makes up an exceedingly small portion of the distressed real estate market. As of July, there are just under 1800 properties in Scottsdale’s shadow inventory, which equates to less than 5% of the total REO inventory market.
Fifty percent (50%) of the current shadow inventory can be found in North Scottsdale between Shea and Pinnacle Peak, in the zips of 85254, 85255, and 85259. These particular areas may be where some hidden values can be found in the next couple of months.
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