What Is A Shadow Market?

What Is A Shadow Market?
Timing is everything.  In real estate it’s no different.  So what is a shadow market and how do you know when you’re in one?
A shadow market means the stash of properties yet to be listed for sale on the MLS (Multiple Listing Service).  Shadow markets have been increasing in size across the country and here in Seattle too.  Banks with large inventory of preforeclosures or foreclosed properties are holding out as well as sellers who are sitting tight, waiting for the slow improvements of the market.  The good news is – we’ve been seeing these improvements in home values over the last six months or more.  The flip side is there are still many home owners in negative equity which is contributing to the tight inventory conditions.  We are, in short, in a shadow market: more buyers than sellers.
In a shadow market, brokers and investors will tend to sell properties off market.  Perhaps it’s a seller who wants his privacy and tells his broker he’s willing to sell at the right price and he has “x” number of days to do it.  These are known as pocket listings. A pocket listing is when the broker (and only the broker) has a client who wants to sell but doesn’t want it advertised.  If it’s an investor looking to buy something off market – he usually be looking for a dumpster out in front of a house and possibly getting ready to sell.  All these things contribute to a shadow market which in turn leads to shrinking inventory.