Shadow inventory is more a gut check than hard measure. It has two primary components: foreclosures held by the banks that aren’t actively listed and the amorphous legions of people that want to sell but are either already upside down or unwilling to give it away cause they still think a rebound to 2006 prices is only a couple years away.
There is a quazi third piece, the foreclosure pipeline however that is really just the 2nd piece not getting their rebound in time to prevent them from becoming the 1st piece.
I honestly can’t tell you about Mira Mesa or many specific areas of SD, but in OC, the heavy selling areas post 2003 (OC is at 2003 pricing) have subtantial shadow inventory. You see it in the lack of homes for sale and a comparison to the low values and foreclosures.
Can they afford it? Maybe. But how long will a person hold on to a $700,000 loan when they can’t sell it for $450,000?
Of course, it does beg the obvious question, can they afford it? I don’t think so since foreclosure looks like a Christmas tree with the bulbs of NODs, NOTs, and REOs.
In the past, if you got into financial stress, you sold the house and salvaged what equity you could. If you upside down like the many of the buyers what do you do? Grind a short sale? That requires admitting that you really can’t afford it and in OC and parts of SD, conspicious consumption was the rule of the day.
The biggest roadblock to declining prices is the denial that we aren’t as rich as we pretend to be.
