What few naysayers about the housing market that are still out there always seem to point to the nebulous "Shadow Inventory" as their reasoning for future price declines. The assumption is that banks have foreclosed on a multitude of homes that they have intentionally held on to instead of liquidating in order to control the rate at which homes saturate the market. The theory is that if banks listed every home they foreclosed on, the market would have been absolutely flooded with inventory and prices would have collapsed completely.

The intersting thing about the "Shadow Inventory" theory is just that - it is a mysterious theory or supposition that no one has yet to quantify. You'd think someone would have solid numbers tracking such an inventory and know which areas of the country have the highest number on homes on hold. It wouldn't be that difficult to track. But for some reason, I have only seen guesses as to how many homes banks might be holding on to on a national scale.

Regardless, I am more concerned with the Big Bear real estate market and whether there is a shadow inventory here and how it might affect things in the future. Here are my thoughts on this.

I track foreclosures through a paid site that is fairly detailed. Although I cannot say that I track every single property that is foreclosed on and pay specific attention as to if and when it gets listed for sale by the bank, I can say that I would have to guess that at the very least, 80% of these foreclosures have subsequently come on the market as listings.

Keeping this in mind, per the Big Bear MLS, there have been about 1480 foreclosures since this whole mess began. So let's just be really conservative and imagine that the banks held on to one out of every three properties they foreclosed on. This is an extremely high estimate and I am certain that if there is a shadow inventory, it is much less than 1 in 3. Regardless, if it were 1 in 3, that would mean there would be about 740 homes in the Big Bear shadow inventory.

If the banks were foolish enough to release all these homes for sale on the market all at once, that would increase today's historically low home inventory from 333 homes for sale up to 1073 homes for sale. Having under 1100 homes for sale in Big Bear is nothing to worry about as most agents believe that about 1000 homes for sale is a good balanced number for our market. Keep in mind that we had over 1400 homes for sale in 2009. So 1073 listings, in my opinion, wouldn't be anything disconcerting.

So in the worst case scenario of banks perhaps having held back 1 in 3 foreclosures, if the banks were to release them all into the market at once (which they'd never do), the impact would be much less negative to our local Big Bear real estate market than most shadow inventory theorists believe.

I am not saying that shadow inventory is not a problem on a national scale. I don't know enough about the nationwide market numbers to judge. But since Big Bear is my area of expertise if you will, I feel confident in saying that on a local level, shadow inventory is less of a concern to me than most conspiracy theorists would like it to be.