Shadow Inventory Hurts Luxury Homes, Too

It will take more than three years to sell all the properties having loans that are seriously delinquent, in foreclosure or under REO, says a recent report. This shadow inventory, coupled with a lethargic buying crowd is affecting sellers -- from owners of low-end homes to luxury mansions -- who can't move their properties at prices they would like, even if they are not facing foreclosure.

One of those affected is Heidi Steiger, an investment banker who wants to sell her luxurious 12,000-square-foot home (pictured left), in the lakeside town of Tuxedo Park, N.Y., so that she can move to Florida, now that she no longer has children at home. But after several price reductions, the 1909 stone-and-stucco Georgian on 19 acres, known as Top Ridge, still hasn't sold.

The data in the Nov. 1 report released by Fitch Ratings reveals that, based on recent liquidation trends, it will take more than 40 months to clear existing distressed inventory. In judicial foreclosure states, such as Florida, it is expected to take even longer than the national average. And so long as distressed homes are on the market, that means challenges for people like Steiger, who aren't underwater or facing foreclosure, but simply want to sell at a decent price.