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Will the Upcoming Election Shed Some Light on Shadow Inventory?

Ever since the notorious subprime mortgage meltdown and subsequent collapse of the housing market in 2007-2008, many of the nation’s lenders have found themselves loaded down and plagued with a plethora of foreclosed real estate holdings.

Not wanting to create an influx of inventory in what had been an unambiguous buyer’s market for several years, lenders were hesitant to overstep the delicate tenets of supply and demand for fear that such a step would further reduce property values, diminishing their ability to recoup housing costs and possible ROI.

This “retreat” from the market resulted in a surplus of what is commonly known as the “shadow inventory.” Frustrated with how the market’s been trending, both buyers and lenders are just now beginning to actively seek out real estate transactions, but their previous inactivity has resulted in a stalemate of sorts, leaving the market sluggish and in desperate need of a kick-start.

As the 2012 presidential election looms, the question has been raised: How exactly might this inaugural season and possible transition of power affect lenders, REO sales agents, property preservation professionals, and others in default servicing?

Many industry experts are predicting that, regardless of which candidate is chosen, the shadow inventory will begin to make its way onto the market after the presidential election is decided and a leader is installed. Based on this hypothesis, the stability symbolized by a new presidential term will afford the market a greater feeling of security, leading it to correct itself simply because the transitional period of campaigning has come to an end and a final decision has been made.

The election itself, as opposed to the actual victor, could be the catalyst for a positive market change (and charge). That being said, the modus operandi as well as the speed at which the shadow inventory emerges very likely will be impacted by the chosen candidate’s political plans.

Both post-election scenarios have supporters with convincing arguments as to why their pick for commander-in-chief would provide a positive boon to the nation’s limping housing market, and we will be sharing some of those viewpoints with you over the coming days. In the meantime, we’d like to know which campaign you would choose to lead us out of the crisis, and which policies you think would be most effective in bringing the industry’s shadow inventory into the light.