Shadow Inventory - Another Leg Down in September?

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Submitted by Disgruntled Patriot on July 21, 2009 - 7:40pm

Many of us have closely tracked REO inventory within our respective counties and noticed a distinct reduction in foreclosed homes making normal progress to the marketplace. It appears the banks have both slow rolled the foreclosure process and then held back listing vacant properties. Anecdotally, the REDC auctions are far less frequent and on a much smaller scale. My wife is an RE agent in Solano County (my opinion of boom-time agents ranks near litigation-crazed attorneys; so I must qualify that she is a new, honest agent who cut her teeth in a lousy market and earns every penny of her discounted commission). Latest rumor at the office is that the banks plan to crack the faucet in September and list 250 held-back homes in Solano County. Any evidence of this kind of market timing down south? Any comments or speculation on the level of coordination by the banks/government?

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Banks fought so hard to
Submitted by carlsbadworker on July 21, 2009 - 7:57pm.

Banks fought so hard to remove mark-to-market accounting. It is hard to imagine that they would then turn around and release all the inventory simultaneously at the market price. Banks have to release the inventory slow enough so that it wouldn't cause big enough loss that forces them to raise new capitals. That said, if the stock market keeps going up, they should have not much problem raising the much needed capital.

If I had a dollar for every
Submitted by AK on July 21, 2009 - 9:26pm.

If I had a dollar for every time some "well-connected insider" down here said the banks were about to open the REO floodgates ...

Trust no one! :)

AK wrote:If I had a dollar
Submitted by Effective Demand on July 21, 2009 - 9:40pm.

AK wrote:
If I had a dollar for every time some "well-connected insider" down here said the banks were about to open the REO floodgates ...

Trust no one! :)

I agree 100%. I've talked to agents who "just got off the phone with an Asset Manager" and you get the floodgates are opening. Hasn't happened.

You can look at what trustee sales have happened (public records).. and then go look at if those properties have been listed (MLS). For the areas near population centers and active markets, You'll be sorely disapointed if you are expecting any huge number of REOs sitting in the wings outside of the normal float (in eviction, trash out, waiting for pricing, etc) and a few stragglers that are tied up due to various reasons.

Shadow inventory consists of the large amount of homes sitting on the sidelines that CAN be taken back by the banks but aren't. IMHO it does not generally consist of a large number of homes that have been taken back but aren't being sold (outside of the lag time for eviction, trash out, BPO, etc).

This is a reason I follow trustee sales with these graphs, they are the leading indicators of "near" future inventory:
http://effectivedemand.blogspot.com/2009...

AK wrote:If I had a dollar
Submitted by AN on July 21, 2009 - 9:40pm.

AK wrote:
If I had a dollar for every time some "well-connected insider" down here said the banks were about to open the REO floodgates ...

Trust no one! :)


"In God we trust. Everyone else, bring data." That's our moto and I'm sticking w/ it. I'll believe the flood gate claim when I see it. People were claiming the flood gate would get open in June. June came and went w/out a peep.

for now we have a 'shadow
Submitted by skywalker on July 21, 2009 - 10:59pm.

for now we have a 'shadow tsunami'

This was already posted on
Submitted by SD Realtor on July 22, 2009 - 12:41am.

This was already posted on another thread by a intuitive poster but if you look at the stats for june trustee sales it was the largest increase for a long long time.