It would seem that the shadow inventory is larger than most have expected.  The shadow inventory are REO (Real Estate Owned) properties, or more commonly bank owned foreclosures.  As many as 90 percent of REOs are withheld from sale, according to estimates recently provided to AOL Real Estate by two analytics firms. It’s a testament to lenders’ fears that flooding the market with foreclosed homes could wreak havoc on their balance sheets and present a danger to the housing market as a whole.

Realtytrac, an online foreclosure marketplace recently noted that just 15% of REO homes in Washington DC are actually up for sale, and that this number, statistically speaking could be used as an approximate average for the nation as a whole. Daren Blomquist, vice president of RealtyTrac, said that he was surprised by his company’s finding, especially since a similar analysis in 2009 found that banks were attempting to sell nearly twice as much of their REO inventory back then.

“It was surprising to see that that percentage had come down,” he said, noting that many agents that his firm has spoken to “have mentioned that there’s actually a shortage of foreclosure inventory — and they’re wanting more.”

 Many problems abound when it comes to the listing of REO properties.  Fannie Mae, for instance, said that it could not market nearly 48% of its REO inventory as they were either still occupied under repair or being rented.  There is also the more practical concern of how releasing all of those foreclosed properties would impact the housing market as a whole, almost certainly driving down prices, some experts estimate by as much as 20%.  Most support the current strategy of a slow release of properties onto the market, which would not negatively effect either the lenders, or current homeowners who are finally starting to see some relief from dipping home prices.