“Quality is not an act, it’s a habit.” – Aristotle
One of the most widespread and frustrating real estate trends to emerge last year was listing withdrawals. As the housing landscape shifted to reflect more inventory but with higher homeowner costs, the market stalled. In response, disappointed sellers yanked their homes off the market when over-asking offers, waived inspections and quick, all-cash closings didn’t flood in as they did during the pandemic. Arguably, most of these thwarted sellers still want to sell but are biding their time. And as time marches on, more and more would-be sellers are moving from “want to” to “have to.” Will 2026 be when all this changes? It’s harder than ever to read the tea leaves but here’s a breakdown on what shadow inventory is and how to make the most it:
DESCRIPTION OF SHADOW INVENTORY
Shadow inventory can be all of the following:
- Bank owned properties (REOs) from foreclosure
- Homes held back from the market by homeowners waiting for better market conditions
- Second homes (like VRBOs and Airbnbs) that have become a financial burden
- “Boomer” inventory soon to be marketed because heirs prefer not to hold on to family property
- Any properties that are for sale but aren’t advertised publicly (like private listings)
Shadow inventory is an important indicator for economists because its release typically signals the bottom of the market. This is the golden moment investors look for when shopping for discounted buying opportunities. This is also the moment when potential buyers in a strong position to buy will more likely do so. Today’s shadow market is different from, say, 2008 in that most homeowners still have plenty of equity and inventory remains in short supply in many areas.
Chief economist at Compass, Mike Simonsen, estimates delistings to be around 150K nationally. This indicates shadow inventory held by homeowners who most likely have a lot of equity and a very low interest rate. The hope is that if mortgage rates continue to improve and the job market remains strong, 2026 could be a better housing market than we’ve lately seen.
SIGNS OF MARKET IMPROVEMENT
Three things to pay attention to as 2026 unfolds:
- New Listings: The rate of new listings – A nice, steady rise would indicate a healthy spring market whereas a sudden explosion could be a problem.
- Employment: If employment increases and companies expand mobility should pick up resulting in more market activity and relocation.
- Pending Sales: Weekly pending home sales numbers will show either momentum or deceleration.
WAYS TO PREPARE
If you haven’t done so already establish consistent client follow-up, regardless of where your past clients have landed. Blanket-pollination of your name is critical and will lead to results. At the end of the day it’s all about name recognition in real estate. Make a promise to yourself to check in with past clients at least twice a year. This will help establish a memorable presence which you can consistently promote through phone calls, notes, emails, social media presence and community involvement. Shadow inventory indicates many potentials listings coming to market. Make sure you are the listing agent of choice by connection and client follow-up so that you become the natural “go to” when the decision to sell is made. The National Association of Realtors noted that 90% of agents fail to follow up with past clients. Don’t be that agent! Double-down on the habit of follow up and you’ll stay busy in both the good times and the lean ones.