An Example of Shadow Inventory

Out at the Peak profiled a home on Yeager Drive in Santa Rosa earlier in the year pointing out it had been in escrow 3 or 4 times yet the sale would always fall through. The house still has not sold... yet it is NOT listed on the MLS, an example of "shadow inventory" in Sonoma County.

The history of the home is telling. According to Redfin the last sale was in October 2004 for $449,000. But ForeclosureRadar.com show another transaction occurring in January 2006 when title was transferred with a 1st mortgage of $433,600 and a second mortgage of $46,000 (total: $479,600). Both these loans were from Alliance Bancorp of Brisbane, California.

A year and a half later in July 2007 Alliance Bancorp of Brisbane filed for bankruptcy due to defaults in its Alt-A (low-doc) loan portfolio.

A year later in July 2008, a notice of default was filed on the house on Yeager as they had stopped paying their mortgage. By October it went up for auction and was resold to the bank (obviously not Alliance since they were out of business).

Since then it has been on and off the market, but is currently not listed on the MLS. In short, this IS shadow inventory. Comparable homes in the area are now selling for around $250,000, about 50% off the peak.

One last note: while doing research for this post I saw that Alliance Bancorp's former CEO is now working at an investment group in San Francisco that specializes in residential mortgage backed securities. Her bio states:

"Ms. Lisa Huehring was President/CEO of Alliance Bancorp, Brisbane, CA, where she was responsible for the vision, mission and culture of the company. In 2006 and 2007 Alliance Bancorp originated over $8 billion in high credit quality mortgage loans,..."

[emphasis mine]