[quote=jpinpb]OK. FWIW, my friend (married couple) bought at peak (in Linda Vista). They decided to do a short sale and get out from under their depreciating overpriced condo. The short sale was successful after five months and sold for way less than peak (45% off and below 2001 price). Note: They did not make a payment for about 8 to 10 months. They did not get a NOD during that time.
Was this considered shadow/stealth inventory?
Are we deeming shadow/stealth inventory only properties w/NODs? I’ve seen places listed as short sales w/NODs and some short sales that didn’t have NODs yet. I’ve seen places w/NODs and foreclosure dates that still have not listed and some that eventually get bank owned and list.
Seems we don’t have a real definition for stealth/shadow inventory. To me, if it’s distressed and ends up eventually somehow to market, the end result has been a lower comp from peak for the most part. In the end, that ultimately reflects the outcome of this bubble.[/quote]
Setting aside a definition for shadow inventory. That Amherst calculation for what they call shadow inventory, really it’s just future inventory, is a really good indicator of future downward pressure.
You take the delinquency rates and multiply them by a cure rate, which is just a statistical probability of what is to come of mortgages at certain delinquency rates.
Following the delinquency rates you can extrapolate the amount of future defaults. In San Diego’s case it is going up dramatically. Prime and Alta-a just jumped up significantly. Which are the vast bulk of mortgages. So future downward pressure is increasing as fast as it’s ever been.
The only counter to that is Loan mods which have an over 50% failure and you can be sure that every person behind is not trying to get a loan mod. Probably just a fraction. So that is a negligible stat in my eyes. You mine as well ignore it. It’s just delayed and slightly lessened downward pressure.
The other daunting statistic is 43% of all mortgages, over a 250,000 are underwater in San Diego. That is an enormous strategic default risk. Which is a growing trend
Just looking at those two statistics should be enough to tell you what you need to know about the market.
When prices go down another 10-15% the percentage of underwater mortgages will be over 60%.
This is the default-ocalypse… If somehow the dollar remains world reserve currency, prices will get cut in half again.
If not we have much bigger problems than worrying about home prices.
