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15 years ago

A sobering update Rich. I
A sobering update Rich. I copy below an FT article which makes the existence of the shadow inventory more of a global story. Graham

Foreclosure to the bone
Published: January 11 2009 18:55 | Last updated: January 12 2009 09:25
Decisions, decisions. How to spend the next $350bn? Democratic policymakers want to improve the oversight of the troubled asset relief programme and better track how recipients use government funds. They also want at least $40bn of the next tranche to be used to help struggling homeowners stave off foreclosure. With the first slug of money lodged in bank balance sheets, it is time, they argue, to spread aid around.

However well intentioned, helping homeowners is a daunting challenge. Foreclosure figures and the housing market are set to worsen. Resets loom on alt-A and option adjustable-rate mortgages, which could cause borrowers to default at similar rates to the subprime segment. State-level moves to slow foreclosures will have pushed filings from last year into this. Rising unemployment, too, is set to increase delinquency rates.

Worse still, given already sky-high supply, there is evidence that foreclosed properties are not yet fully reflected in inventory figures. RealtyTrac matched its database of bank-owned properties to agents’ listings for four states: California, Florida, Wisconsin and Maryland. Only between a quarter and 35 per cent of bank-owned properties (known as real estate-owned, or REO) showed up in the listings, suggesting that banks hold a sizeable “shadow inventory” of foreclosed homes. Adding back that missing portion of RealtyTrac’s 900,000-odd total of REO homes would increase official inventory figures based on listings by about 15 per cent. Such an overhang of minimally maintained properties would further depress prices.

Citigroup’s endorsement last week of bankruptcy reform, enabling judges to restructure mortgage debts – previously the industry’s bête noire – shows new willingness for drastic solutions. But such measures could come at the cost of added uncertainty and higher interest rates. Loan modification, meanwhile, remains tricky as shown by the limited uptake of existing programmes and high rates of re-default. There is no easy answer to mortgage misery.’

15 years ago

Thanks Rich. We’ll get to see
Thanks Rich. We’ll get to see just how influential govt intervention can be in a market. As I think they’re going to try every trick imaginable to put a floor in the market.
I still would like to see yearly inventory reports from the early 1990’s until now. I think that would show that average number of homes on the market well below 10,000 for most of the last 15 years.

15 years ago
Reply to  peterb

Honestly, I had to look up
Honestly, I had to look up “cyclopean.” Nice word.

15 years ago
Reply to  davelj

Ditto with cyclopean..

Ditto with cyclopean..
I almost created a poll on it to see who had to look it up and who didn’t.Spell check can’t handle it.
Did you pull it out of a thesaurus Rich?
Your writing is always a pleasure to read Rich.