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Iventory levels of homes for sale have been falling steadily all year with Orange County dipping to a level not seen since January 2006. In particular, REO, or bank-owned, listings have been diminishing and now represent just about four percent (4%) of total listings. With all the news about the increasing number of foreclosures (for more information see: http://www.csiragroup.com/blog/foreclosures-continue-to-increase), the fact that REO listings are declining seems illogical to many analysts.

Some people believe that there is a “shadow inventory” of homes, foreclosed on by banks, who are unwilling to list the properties to avoid a flood of distressed inventory into the market, thereby collapsing housing prices even further.

With positive signs of a recovery signaling better times ahead for the housing industry, this is a worrisome piece of information. There are reports that as many as 600,000 homes are being held back by the banks nationwide (80,000 in California) – enough to have a devastating impact on housing prices and reverse the progress that has been made in stemming the price declines we’ve experienced.

In any case, we will continue to monitor this topic and hope to report more as facts present themselves. If you have any information or would like to express an opinion, we would love to hear from you.