For Sale: A House That's Not For Sale

There seems to be a lot of discussion about the existence of "shadow inventory" and what it means to the future of home prices.

The story goes that a substantial number (like, 80,000 in California) of foreclosures are intentionally being kept from the market by banks and lenders. Either by delaying foreclosures or taking their sweet ass time to get properties to market, the claim is that if this enormous tidal wave of inventory were to suddenly hit the market, home values would plummet due to an over-saturation of discounted supply. Therefore, if the banks withhold this bargain-priced inventory, they can keep inventory at the current low levels, spur demand, and keep house prices propped up.

It seems the debate centers on how much shadow inventory is really out there and whether it would make much of a difference if it actually made it to the MLS in bulk. Some say those waiting for a "tsunami" of shadow inventory to flood the market and put devastating downward pressure on prices will be sorely disappointed.

Anyhow, what qualifies as "shadow inventory" seems a bit muddled. When discussing S.I., it is most commonly applied to foreclosures. But then some consider underwater and distressed homeowners at risk of foreclosure (tick-tocking Option ARMs, etc.) as part of the shadow inventory. Makes sense I guess.

My only question is, do greedtarded sellers count as "shadow inventory?"

It's inventory and it's counted, so it's not really in the "shadows" per se. But it's not "real" inventory either because these sellers are obviously greedfaced dolts with no intention of actually selling.

Like today's "seller":

Address: 329 Redondo St, 90814
Asking Price: $999,900
Year Built: 1919
Size: 2 beds, 2 baths, 3,000 sq. ft. (including 1,400 sq. ft. flower shop)
$/Sq. Ft.: $333
MLS#: P606108
On Redfin: 621 days
Down Payment: $200,000
Monthly Payment: $5,000
Income Requirement: $285,000
Description: Upgraded home with approx. 1,600 Sq.Ft. 2Bed/2Bath/Office/Central Air/2-car Garage/French Doors/2 Decks/Family Kitchen/2 Fireplaces/Formal Dining Room/Inside Laundry/Long gated driveway/backyard with fruit trees - In addition,an attached 1,400 Sq.Ft. commercial storefront currently used as a Florist/gift shop facing Redondo Ave. A unique property with lots of charm and possibilities/High traffic area 3 blocks to the beach. PLEASE CLICK ON MEDIA 21 OR MAIN PICTURE TO ACCESS NEW VIRTUAL TOUR AND PICS!

"High traffic area"? Yeah, you could say that. It's literally right on top of busy-ass Redondo. Just so we're clear, the house "for sale" is a back house attached to a flower shop, but you would take ownership of the whole kit and caboodle.

So, uh, yeah, I guess living in a "high traffic area" is good for business. Terrible for your quality of life, but hey, those Gerber daisies and Mylar balloons pay the bills!

Anyhow, one look at the pricing history and it's obvious this property isn't actually for sale:

Oct 20, 2007 - Listed $1,300,000 (WTF?)
Mar 10, 2008 - Price Changed $1,100,000 (five months after list, we finally see our first price cut)
Jun 21, 2008 - Price Changed $1,200,000 (a price increase! Smart!)
Dec 04, 2008 - Price Changed $1,175,000 (six months after the price increase, and we're still higher than the March price!)
Jan 31, 2009 - Price Changed $1,100,000 (almost two years on the market, and we're still at the March 2008 price)
Mar 10, 2009 - Price Changed $999,900

This oblivious pricing "strategy"--if you can call it that--just reeks of greed and stupidity. If the seller had originally priced at $999,900 in October 2007 (it's been 621 days on market, for fuck's sake!), and chased the market down from there, he might have actually relieved himself of this albatross.

I say "might have" because this House o' Clutter, as mentioned earlier, is on a very busy street. Plus, the kitchen is stunningly outdated and needs to be demolished:

Further, the bathrooms are abhorrent for a million dollar house (or, frankly, any house asking more than $250,000):

Come to think of it, what the hell are you thinking, guy? A million dollars for this pack rat palace? Really?

So, instead of being realistic with pricing during the last two years, here we sit.

And sit.

And sit.

With a seller who is convinced he is "special" and immune to reality. Hey, Chachi, you've been on the market for almost two years. You think maybe, just maybe, you're asking too much money? That thought never bounced around that thick skull of yours? Really?

I mean, it's not as if Belmont Heights properties aren't selling--what do you think to yourself when those nearby, reasonably-priced sellers sell? That they're the chumps?

Oy.

Look, this isn't shadow inventory in the classic definition of a place that should be for sale but isn't on the market. In fact, it's more like a house that's on the market but not really "for sale."

It might actually be the opposite of shadow inventory. Non-sellers like these actually mean there is LESS real inventory on the market to choose from. And with no governmental or regulatory agency (or even shareholders/board members, for that matter) forcing banks to get their REO stock on the market, it's creating hell for buyers because the few decent (in terms of condition and price) properties get bid up to the stratosphere.

Fence-sitters, including me, keep waiting for the shadow inventory to see daylight, but it's worth considering that perhaps the banks and .gov can keep this game of moratoriums and meting out one or two properties at a time going for a long, long time--killing the dire predictions of those betting on an enormous influx of supply in the coming months.