Drop in Shadow Inventory a Good Sign for Real Estate

In the real estate market, sometimes all is not what it seems. Numbers are based on units for sale and units sold, but what about those that haven’t been put on the market yet?

The financial debacle of 2008 created a backlog of stalled sales, called shadow inventory. Many condos that were being built or positioned for sale were held off the market, causing the industry to fear a flood in supply when the economy improved and those units were dumped on top of the normal inventory.  Sorry doom-and-gloomers, we have bad news for you. Shadow inventory has dropped and sales are picking up.

While everyone seems to be in agreement that the shadow inventory, estimated at 6,000-8,000 units in Manhattan by Prudential Douglas Elliman in 2009, has dropped, there’s disagreement as to how much. The Executive Director of Development Marketing for Halstead Property has a rosy outlook, estimating around 1,000 units. Prudential Douglas Elliman’s market  report preparer is a little more conservative, guessing there are still 4,000 to 5,000 shadow units in the city.

As much as 40% of the shadow inventory is said to be lurking in the Financial District, which was on the verge of a boom before the 2008 bust. The problem is, nobody is really sure how much is there, or where it is.  Maybe StreetEasy’s head of research, Sofia Song, can clear it up for us.  “[Shadow inventory] is murky, nebulous and… shadowy.”  Or maybe not.

Source: The Real Deal

Photo Source: Dave Martinidez

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