Phoenix home inventory could be larger than expected

There is a looming debate over real estate in Phoenix, AZ. Some believe there are thousands of homeowners that haven’t kept up with their mortgage payments in years, but banks have yet to move the homes into foreclosure. Other real estate experts are calling this in-between “shadow inventory” a myth.

The Mortgage Bankers Association released statistics recently showing the number of borrowers behind on their monthly mortgage payments in Arizona. In the beginning of the year, the delinquency rate was at 6.5 percent. This number fell to 6.2 percent at the end of the second quarter. These statistics have put the state 35th in the country for mortgage delinquency.

Phoenix’s foreclosure rate was 2.36 percent in June, down from 3.63 percent the same time last year. According to the Phoenix Business Journal, June was the 18th consecutive month that saw a decrease in foreclosure rates. Experts are saying the drop in foreclosures are causing home prices to rise, as the inventory is down by 34.4 percent in the last 12 months.

The Phoenix metro area is still going through a recovery, and more developers have flocked to the area looking for new land. As of July 15, there were 332 actively selling new home subdivisions in Phoenix, down from 400 in January. As most people seeking out the area are interested in new homes, it’s expected that 60 percent of the lots will be taken within a year.

Real estate expert Mike Orr of Arizona State University's Real Estate Studies Department is one who doesn’t believe in the shadow inventory.

"I actually keep a file of exactly what houses the banks own and what they're doing with them," Orr told radio station KTAR. "When you actually count them out, it's a relatively trivial amount that they actually own that they haven't already listed for sale."

Concern over the shadow inventory persists in the minds of some experts that believe thousands of homes could be dumped into the Phoenix housing market, causing a halt in the recovery process. According to The Wall Street Journal, there is increasingly clear evidence that banks sit on foreclosed homes. For example, across the country there were 3.5 million loans in the foreclosure process at the end of May, but banks only owned 407,000 homes at the time.