Shadow inventory in San Diego

San Diego was one of the first and hardest hit areas of the housing crisis. Therefore, one would think that it would be one of the first to recover. But, it seems as if the amount of shadow inventory there dwarfs the amount of homes for sale. Specifically, the number of homes in foreclosure but not listed for sale is 19,453. This compares to the number of homes for sale in SD of 11,976. So, there are 1.6x as many homes waiting to flood the market as are currently on the market. More details here.

So, why aren't these homes hitting the market? The author surmises that the foreclosures are "being held back by some combination of moratoria and other bailout programs (or hope for more of the same)". Also, the banks are doing everything they can to avoid recognizing the housing losses that are still on their balance sheets. When a home is sold, the bank is forced to recognize the write-down. But until this happens, banks are able to value the loan at par and avoid taking a hit to earnings.

Also, the Fed recently lifted the constraints on how much money they can provide to Fannie Mae and Freddie Mac in order to "strengthen the housing market". Who knows what tragic, destructive, illogical federal program will result from the lifting of these constraints? Banks are surely hoping for some sort of bailout again, which as we know is simply a transfer of wealth from tax-payers to banks.