CA Shadow Inventory

[analyst]

[quote=AN]The real question is why they’re not letting some of it go? We all know that there’s a lot of demand out there right now in certain areas under certain price point. If they really are actively and purposely holding those back, would it make sense for them to release some of them now? There are plenty of multiple offers out there, so those unsuccessful other offers = real buyers that would gladly buy at today’s price. Why hold back the inventory?[/quote]

The mortgage is $600K. While the mortgage owner sits idle, due to the suspension of mark-to-market rules, the mortgage owner is allowed to maintain the fiction that an asset worth $600K is owned.

As soon as the property is sold for $400k, whether via short sale, auction, or REO, the deception is no longer possible, and the mortgage owner takes a $200K loss. Do this enough times, and owners’ equity in the mortgage owning organization is reduced to the point that they are declared to be the owners no longer (regulatory takeover or bankruptcy liquidation).

When members of congress threatened legislation to override the Financial Accounting Standards Board (FASB) if they did not reverse themselves and withdraw the mark-to-market rules, the leaders of the “independent” FASB “agreed” to go along.

So now mortgage owners have a choice:
1. Go fast, die today.
2. Go slow, remain “solvent” in the short run, hope for salvation in the longer run, either due to direct rescue assistance, the effect of government subsidies to buyers, or generalized inflation driving all prices higher (including the price of of the mortgaged houses).

[Arraya]

[quote=AN][quote=Arraya]
Sometimes you have to integrate common sense with analysis. The housing bubble fueled employment. It was not unpredictable that employment would plummet as the bubble did. The bubble was the economy.

Pent up demand depends on job growth. Unless you count demand as somebody that wants to buy a house and can’t you have a problem. Sideline money is dwindling + job contraction=Lower demand

Lower demand + pent up inventory =

See how easy this is[/quote]
Since you’re talking about integrating common sense, are you assuming the current rate of job contraction is the new normal?[/quote]

No it will stop eventually, but growth will not resume. Also, the rate will continue for years to come. With a significant upturn next quarter. Probably around 2011 it will subside and we will stabilize at around 30-40% real unemployment.

[Arraya]

[quote=AN][quote=Arraya]
Sometimes you have to integrate common sense with analysis. The housing bubble fueled employment. It was not unpredictable that employment would plummet as the bubble did. The bubble was the economy.

Pent up demand depends on job growth. Unless you count demand as somebody that wants to buy a house and can’t you have a problem. Sideline money is dwindling + job contraction=Lower demand

Lower demand + pent up inventory =

See how easy this is[/quote]
Since you’re talking about integrating common sense, are you assuming the current rate of job contraction is the new normal?[/quote]

No it will stop eventually, but growth will not resume. Also, the rate will continue for years to come. With a significant upturn next quarter. Probably around 2011 it will subside and we will stabilize at around 30-40% real unemployment.

[Arraya]

[quote=AN][quote=Arraya]
Sometimes you have to integrate common sense with analysis. The housing bubble fueled employment. It was not unpredictable that employment would plummet as the bubble did. The bubble was the economy.

Pent up demand depends on job growth. Unless you count demand as somebody that wants to buy a house and can’t you have a problem. Sideline money is dwindling + job contraction=Lower demand

Lower demand + pent up inventory =

See how easy this is[/quote]
Since you’re talking about integrating common sense, are you assuming the current rate of job contraction is the new normal?[/quote]

No it will stop eventually, but growth will not resume. Also, the rate will continue for years to come. With a significant upturn next quarter. Probably around 2011 it will subside and we will stabilize at around 30-40% real unemployment.

[Arraya]

[quote=AN][quote=Arraya]
Sometimes you have to integrate common sense with analysis. The housing bubble fueled employment. It was not unpredictable that employment would plummet as the bubble did. The bubble was the economy.

Pent up demand depends on job growth. Unless you count demand as somebody that wants to buy a house and can’t you have a problem. Sideline money is dwindling + job contraction=Lower demand

Lower demand + pent up inventory =

See how easy this is[/quote]
Since you’re talking about integrating common sense, are you assuming the current rate of job contraction is the new normal?[/quote]

No it will stop eventually, but growth will not resume. Also, the rate will continue for years to come. With a significant upturn next quarter. Probably around 2011 it will subside and we will stabilize at around 30-40% real unemployment.

[Arraya]

[quote=AN][quote=Arraya]
Sometimes you have to integrate common sense with analysis. The housing bubble fueled employment. It was not unpredictable that employment would plummet as the bubble did. The bubble was the economy.

Pent up demand depends on job growth. Unless you count demand as somebody that wants to buy a house and can’t you have a problem. Sideline money is dwindling + job contraction=Lower demand

Lower demand + pent up inventory =

See how easy this is[/quote]
Since you’re talking about integrating common sense, are you assuming the current rate of job contraction is the new normal?[/quote]

No it will stop eventually, but growth will not resume. Also, the rate will continue for years to come. With a significant upturn next quarter. Probably around 2011 it will subside and we will stabilize at around 30-40% real unemployment.

[Arraya]

[quote=jpinpb]To be a stickler, the article is slightly deceiving. It states:

“Bottom line – there is
no “shadow” inventory of bank owned homes being intentionally withheld from the market.”

Since there is an endless amount of NODs that the bank is not acting on, technically, they don’t own them yet. That’s not even address the NODs that banks aren’t even bothering to file on places that they haven’t received mortgage payments on for months.

Again, as I’ve said on other threads, the inventory is there, but in limbo. The question is how it will get absorbed or (sdr) disposed.[/quote]

That is the million dollar question. I think I figured out the reason for the hold up. Once the banks foreclose on it they have to take the loss. The reason they don’t foreclose is because of accounting rules. They do not have to count it that way and can let it sit forever without taking a loss. The problem is they are coming back too fast, so they are bottle necking. How long that can go on. Who knows.

[Arraya]

[quote=jpinpb]To be a stickler, the article is slightly deceiving. It states:

“Bottom line – there is
no “shadow” inventory of bank owned homes being intentionally withheld from the market.”

Since there is an endless amount of NODs that the bank is not acting on, technically, they don’t own them yet. That’s not even address the NODs that banks aren’t even bothering to file on places that they haven’t received mortgage payments on for months.

Again, as I’ve said on other threads, the inventory is there, but in limbo. The question is how it will get absorbed or (sdr) disposed.[/quote]

That is the million dollar question. I think I figured out the reason for the hold up. Once the banks foreclose on it they have to take the loss. The reason they don’t foreclose is because of accounting rules. They do not have to count it that way and can let it sit forever without taking a loss. The problem is they are coming back too fast, so they are bottle necking. How long that can go on. Who knows.

[Arraya]

[quote=jpinpb]To be a stickler, the article is slightly deceiving. It states:

“Bottom line – there is
no “shadow” inventory of bank owned homes being intentionally withheld from the market.”

Since there is an endless amount of NODs that the bank is not acting on, technically, they don’t own them yet. That’s not even address the NODs that banks aren’t even bothering to file on places that they haven’t received mortgage payments on for months.

Again, as I’ve said on other threads, the inventory is there, but in limbo. The question is how it will get absorbed or (sdr) disposed.[/quote]

That is the million dollar question. I think I figured out the reason for the hold up. Once the banks foreclose on it they have to take the loss. The reason they don’t foreclose is because of accounting rules. They do not have to count it that way and can let it sit forever without taking a loss. The problem is they are coming back too fast, so they are bottle necking. How long that can go on. Who knows.

[Arraya]

[quote=jpinpb]To be a stickler, the article is slightly deceiving. It states:

“Bottom line – there is
no “shadow” inventory of bank owned homes being intentionally withheld from the market.”

Since there is an endless amount of NODs that the bank is not acting on, technically, they don’t own them yet. That’s not even address the NODs that banks aren’t even bothering to file on places that they haven’t received mortgage payments on for months.

Again, as I’ve said on other threads, the inventory is there, but in limbo. The question is how it will get absorbed or (sdr) disposed.[/quote]

That is the million dollar question. I think I figured out the reason for the hold up. Once the banks foreclose on it they have to take the loss. The reason they don’t foreclose is because of accounting rules. They do not have to count it that way and can let it sit forever without taking a loss. The problem is they are coming back too fast, so they are bottle necking. How long that can go on. Who knows.

[Arraya]

[quote=jpinpb]To be a stickler, the article is slightly deceiving. It states:

“Bottom line – there is
no “shadow” inventory of bank owned homes being intentionally withheld from the market.”

Since there is an endless amount of NODs that the bank is not acting on, technically, they don’t own them yet. That’s not even address the NODs that banks aren’t even bothering to file on places that they haven’t received mortgage payments on for months.

Again, as I’ve said on other threads, the inventory is there, but in limbo. The question is how it will get absorbed or (sdr) disposed.[/quote]

That is the million dollar question. I think I figured out the reason for the hold up. Once the banks foreclose on it they have to take the loss. The reason they don’t foreclose is because of accounting rules. They do not have to count it that way and can let it sit forever without taking a loss. The problem is they are coming back too fast, so they are bottle necking. How long that can go on. Who knows.

[Rich Toscano]

[quote=analyst]

The mortgage is $600K. While the mortgage owner sits idle, due to the suspension of mark-to-market rules, the mortgage owner is allowed to maintain the fiction that an asset worth $600K is owned.
[/quote]

Analyst, according to a longtime pigg who is very knowledgeable about the banking industry, that isn’t how it works… see this comment for his explanation:

http://piggington.com/shadow_inventory_the_flood_that_may_never_come#comment-117626

Rich

[Rich Toscano]

[quote=analyst]

The mortgage is $600K. While the mortgage owner sits idle, due to the suspension of mark-to-market rules, the mortgage owner is allowed to maintain the fiction that an asset worth $600K is owned.
[/quote]

Analyst, according to a longtime pigg who is very knowledgeable about the banking industry, that isn’t how it works… see this comment for his explanation:

http://piggington.com/shadow_inventory_the_flood_that_may_never_come#comment-117626

Rich

[Rich Toscano]

[quote=analyst]

The mortgage is $600K. While the mortgage owner sits idle, due to the suspension of mark-to-market rules, the mortgage owner is allowed to maintain the fiction that an asset worth $600K is owned.
[/quote]

Analyst, according to a longtime pigg who is very knowledgeable about the banking industry, that isn’t how it works… see this comment for his explanation:

http://piggington.com/shadow_inventory_the_flood_that_may_never_come#comment-117626

Rich

[Rich Toscano]

[quote=analyst]

The mortgage is $600K. While the mortgage owner sits idle, due to the suspension of mark-to-market rules, the mortgage owner is allowed to maintain the fiction that an asset worth $600K is owned.
[/quote]

Analyst, according to a longtime pigg who is very knowledgeable about the banking industry, that isn’t how it works… see this comment for his explanation:

http://piggington.com/shadow_inventory_the_flood_that_may_never_come#comment-117626

Rich

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