CA Shadow Inventory

[analyst]

[quote=temeculaguy]

On a serious note, the ups and downs of the distressed pipeline do happen, but the capacity of the system to process those properties takes the gyrations out of it and the inventory is delivered at a measured pace. I don’t think the system has the ability to flood anything, a steady stream is about all they can provide and that doesn’t cause huge fluxuations in prices unless the buyers stop. It’s the only conclusion I can come to as to why the holders of distressed properties wouldn’t have tried to get everything out on the market while it’s being snapped up in hours and while rates are low, who knows how long this little “short term sellers market within a longer term buyers market” will last.[/quote]

The amount of work to accomplish a foreclosure using the trustee sale method is minor, bordering on trivial. Most of the work is handled by the computer system, which produces the required action documents on a pre-programmed schedule when the payments don’t show up. Send the property to auction without price restrictions, and the auction buyers will take all the risk and do all the clean-up, moving the prices appropriately lower in the process.

The work becomes substantial only when the goal is to avoid foreclosing. This is the policy adopted by the federal government to avoid exposing the insolvency of the banking system, and to protect the people downstream from them who would suffer devastation to their retirement funds and other investments.

The federal government is carrying out the policy by greatly affecting both supply (downward due to suspension of mark-to-market, direct rescue money) and demand (upward due to artificially low interest rates, low down-payments, down-payment assistance).

[CA renter]

[quote=FormerSanDiegan][quote=analyst]The phrase “shadow inventory” came into existence to describe quantities of properties which were expected to appear as listings for sale, but, for some reason, did not.

In that context, there is no difference between any of the following:
1. REO not listed for sale
2. NOT, sale postponed, no short sale in progress
3. NOD, NOT not issued, no short sale in progress
4. delinquent, NOD not issued, no short sale in progress
[/quote]

Inventory numbers by themselves are meaningless. One needs to also consider the demand side.

For example, if the inventory is 10,000 homes and 15,000 sell in a year that is one thing. If 500 sell in a year it’s a completely different story.

So, in that spirit we should start tracking shadow demand. These would be those who will buy in the future but are not current buyers in the market. Current (real buyers) are known from the sales numbers. Shadow buyers would include the following:

1. Those making offers but not getting the house due to competition.
2. Those trolling around realty web sites, saving up down payments for a purchase 12-18 months from now. (these buyers will be ready to purchase about the time those properties in shadow category #2 and 3 come to market).
3. Bubble-sitters.
4. Those aged 26-35 (well, those that still have jobs) who were shut out of housing due to the high prices of the last 5-10 years.
5. Seniors in high school. Some of these kids will eventually go to college, knock someone up and need a place to live in 5-15 years.

Anyone know of good reliable sources to find the number of these buyers ?

Measuring future inventory without considering future demand is a fool’s game. Neither is predictable.[/quote]

The term “shadow inventory” is used to describe an unusual and extraordinary supply situation.

What you cited are **normal** demand variables. They exist in any normal market.

The “shadow inventory” is NOT normal, and does NOT exist in a normal market. If not for the extreme govt interference, this inventory would indeed be on the market. That is why the definition of “shadow inventory” changes with the actions of the govt/PTB. When they move the numbers from one place to another (from REO/off-market to delinquent/no NOD filed), the end result is still the same. It is shadow inventory that **should** be on the market, but is being held back for various reasons. Until we know how this inventory situation is going to be resolved, the market poses greater risks than during a normal market.
——————–

An example of “shadow demand” would be the existence of 500 million Chinese with massive amounts of USD who plan to buy up our real estate as the dollar crashes. That would be an unusual and extraordinary demand variable that would qualify as “shadow demand.” 😉

[CA renter]

[quote=FormerSanDiegan][quote=analyst]The phrase “shadow inventory” came into existence to describe quantities of properties which were expected to appear as listings for sale, but, for some reason, did not.

In that context, there is no difference between any of the following:
1. REO not listed for sale
2. NOT, sale postponed, no short sale in progress
3. NOD, NOT not issued, no short sale in progress
4. delinquent, NOD not issued, no short sale in progress
[/quote]

Inventory numbers by themselves are meaningless. One needs to also consider the demand side.

For example, if the inventory is 10,000 homes and 15,000 sell in a year that is one thing. If 500 sell in a year it’s a completely different story.

So, in that spirit we should start tracking shadow demand. These would be those who will buy in the future but are not current buyers in the market. Current (real buyers) are known from the sales numbers. Shadow buyers would include the following:

1. Those making offers but not getting the house due to competition.
2. Those trolling around realty web sites, saving up down payments for a purchase 12-18 months from now. (these buyers will be ready to purchase about the time those properties in shadow category #2 and 3 come to market).
3. Bubble-sitters.
4. Those aged 26-35 (well, those that still have jobs) who were shut out of housing due to the high prices of the last 5-10 years.
5. Seniors in high school. Some of these kids will eventually go to college, knock someone up and need a place to live in 5-15 years.

Anyone know of good reliable sources to find the number of these buyers ?

Measuring future inventory without considering future demand is a fool’s game. Neither is predictable.[/quote]

The term “shadow inventory” is used to describe an unusual and extraordinary supply situation.

What you cited are **normal** demand variables. They exist in any normal market.

The “shadow inventory” is NOT normal, and does NOT exist in a normal market. If not for the extreme govt interference, this inventory would indeed be on the market. That is why the definition of “shadow inventory” changes with the actions of the govt/PTB. When they move the numbers from one place to another (from REO/off-market to delinquent/no NOD filed), the end result is still the same. It is shadow inventory that **should** be on the market, but is being held back for various reasons. Until we know how this inventory situation is going to be resolved, the market poses greater risks than during a normal market.
——————–

An example of “shadow demand” would be the existence of 500 million Chinese with massive amounts of USD who plan to buy up our real estate as the dollar crashes. That would be an unusual and extraordinary demand variable that would qualify as “shadow demand.” 😉

[CA renter]

[quote=FormerSanDiegan][quote=analyst]The phrase “shadow inventory” came into existence to describe quantities of properties which were expected to appear as listings for sale, but, for some reason, did not.

In that context, there is no difference between any of the following:
1. REO not listed for sale
2. NOT, sale postponed, no short sale in progress
3. NOD, NOT not issued, no short sale in progress
4. delinquent, NOD not issued, no short sale in progress
[/quote]

Inventory numbers by themselves are meaningless. One needs to also consider the demand side.

For example, if the inventory is 10,000 homes and 15,000 sell in a year that is one thing. If 500 sell in a year it’s a completely different story.

So, in that spirit we should start tracking shadow demand. These would be those who will buy in the future but are not current buyers in the market. Current (real buyers) are known from the sales numbers. Shadow buyers would include the following:

1. Those making offers but not getting the house due to competition.
2. Those trolling around realty web sites, saving up down payments for a purchase 12-18 months from now. (these buyers will be ready to purchase about the time those properties in shadow category #2 and 3 come to market).
3. Bubble-sitters.
4. Those aged 26-35 (well, those that still have jobs) who were shut out of housing due to the high prices of the last 5-10 years.
5. Seniors in high school. Some of these kids will eventually go to college, knock someone up and need a place to live in 5-15 years.

Anyone know of good reliable sources to find the number of these buyers ?

Measuring future inventory without considering future demand is a fool’s game. Neither is predictable.[/quote]

The term “shadow inventory” is used to describe an unusual and extraordinary supply situation.

What you cited are **normal** demand variables. They exist in any normal market.

The “shadow inventory” is NOT normal, and does NOT exist in a normal market. If not for the extreme govt interference, this inventory would indeed be on the market. That is why the definition of “shadow inventory” changes with the actions of the govt/PTB. When they move the numbers from one place to another (from REO/off-market to delinquent/no NOD filed), the end result is still the same. It is shadow inventory that **should** be on the market, but is being held back for various reasons. Until we know how this inventory situation is going to be resolved, the market poses greater risks than during a normal market.
——————–

An example of “shadow demand” would be the existence of 500 million Chinese with massive amounts of USD who plan to buy up our real estate as the dollar crashes. That would be an unusual and extraordinary demand variable that would qualify as “shadow demand.” 😉

[CA renter]

[quote=FormerSanDiegan][quote=analyst]The phrase “shadow inventory” came into existence to describe quantities of properties which were expected to appear as listings for sale, but, for some reason, did not.

In that context, there is no difference between any of the following:
1. REO not listed for sale
2. NOT, sale postponed, no short sale in progress
3. NOD, NOT not issued, no short sale in progress
4. delinquent, NOD not issued, no short sale in progress
[/quote]

Inventory numbers by themselves are meaningless. One needs to also consider the demand side.

For example, if the inventory is 10,000 homes and 15,000 sell in a year that is one thing. If 500 sell in a year it’s a completely different story.

So, in that spirit we should start tracking shadow demand. These would be those who will buy in the future but are not current buyers in the market. Current (real buyers) are known from the sales numbers. Shadow buyers would include the following:

1. Those making offers but not getting the house due to competition.
2. Those trolling around realty web sites, saving up down payments for a purchase 12-18 months from now. (these buyers will be ready to purchase about the time those properties in shadow category #2 and 3 come to market).
3. Bubble-sitters.
4. Those aged 26-35 (well, those that still have jobs) who were shut out of housing due to the high prices of the last 5-10 years.
5. Seniors in high school. Some of these kids will eventually go to college, knock someone up and need a place to live in 5-15 years.

Anyone know of good reliable sources to find the number of these buyers ?

Measuring future inventory without considering future demand is a fool’s game. Neither is predictable.[/quote]

The term “shadow inventory” is used to describe an unusual and extraordinary supply situation.

What you cited are **normal** demand variables. They exist in any normal market.

The “shadow inventory” is NOT normal, and does NOT exist in a normal market. If not for the extreme govt interference, this inventory would indeed be on the market. That is why the definition of “shadow inventory” changes with the actions of the govt/PTB. When they move the numbers from one place to another (from REO/off-market to delinquent/no NOD filed), the end result is still the same. It is shadow inventory that **should** be on the market, but is being held back for various reasons. Until we know how this inventory situation is going to be resolved, the market poses greater risks than during a normal market.
——————–

An example of “shadow demand” would be the existence of 500 million Chinese with massive amounts of USD who plan to buy up our real estate as the dollar crashes. That would be an unusual and extraordinary demand variable that would qualify as “shadow demand.” 😉

[CA renter]

[quote=FormerSanDiegan][quote=analyst]The phrase “shadow inventory” came into existence to describe quantities of properties which were expected to appear as listings for sale, but, for some reason, did not.

In that context, there is no difference between any of the following:
1. REO not listed for sale
2. NOT, sale postponed, no short sale in progress
3. NOD, NOT not issued, no short sale in progress
4. delinquent, NOD not issued, no short sale in progress
[/quote]

Inventory numbers by themselves are meaningless. One needs to also consider the demand side.

For example, if the inventory is 10,000 homes and 15,000 sell in a year that is one thing. If 500 sell in a year it’s a completely different story.

So, in that spirit we should start tracking shadow demand. These would be those who will buy in the future but are not current buyers in the market. Current (real buyers) are known from the sales numbers. Shadow buyers would include the following:

1. Those making offers but not getting the house due to competition.
2. Those trolling around realty web sites, saving up down payments for a purchase 12-18 months from now. (these buyers will be ready to purchase about the time those properties in shadow category #2 and 3 come to market).
3. Bubble-sitters.
4. Those aged 26-35 (well, those that still have jobs) who were shut out of housing due to the high prices of the last 5-10 years.
5. Seniors in high school. Some of these kids will eventually go to college, knock someone up and need a place to live in 5-15 years.

Anyone know of good reliable sources to find the number of these buyers ?

Measuring future inventory without considering future demand is a fool’s game. Neither is predictable.[/quote]

The term “shadow inventory” is used to describe an unusual and extraordinary supply situation.

What you cited are **normal** demand variables. They exist in any normal market.

The “shadow inventory” is NOT normal, and does NOT exist in a normal market. If not for the extreme govt interference, this inventory would indeed be on the market. That is why the definition of “shadow inventory” changes with the actions of the govt/PTB. When they move the numbers from one place to another (from REO/off-market to delinquent/no NOD filed), the end result is still the same. It is shadow inventory that **should** be on the market, but is being held back for various reasons. Until we know how this inventory situation is going to be resolved, the market poses greater risks than during a normal market.
——————–

An example of “shadow demand” would be the existence of 500 million Chinese with massive amounts of USD who plan to buy up our real estate as the dollar crashes. That would be an unusual and extraordinary demand variable that would qualify as “shadow demand.” 😉

[(former)FormerSanDiegan]

[quote=CA renter]
An example of “shadow demand” would be the existence of 500 million Chinese with massive amounts of USD who plan to buy up our real estate as the dollar crashes. That would be an unusual and extraordinary demand variable that would qualify as “shadow demand.” ;)[/quote]

Sure, let’s put the shadow Chinese buyers in the same category as the shadow inventory due to potential future NODs for prime ARM loans that reset in 2013.

You stated that all the items I point out are normal demand. My point is that shadow inventory zealots do not account for any possibility of increased demand from any source (normal or “shadow”). They point to things like permanent 30% unemployment sapping all future demand and spiraling cycles of price declines due to increased supply. There is no consideration of the impact of price elasticity of demand or other basic concepts that impact the supply/demand relationship among these zealots.

I agree that there will be significant supply coming from recycled homes over the next couple of years due to foreclosures. But to understand its impact on price one has to compare this rate of recycled homes to demand as well as to the potential for displacing new-built product with recycled product.

[(former)FormerSanDiegan]

[quote=CA renter]
An example of “shadow demand” would be the existence of 500 million Chinese with massive amounts of USD who plan to buy up our real estate as the dollar crashes. That would be an unusual and extraordinary demand variable that would qualify as “shadow demand.” ;)[/quote]

Sure, let’s put the shadow Chinese buyers in the same category as the shadow inventory due to potential future NODs for prime ARM loans that reset in 2013.

You stated that all the items I point out are normal demand. My point is that shadow inventory zealots do not account for any possibility of increased demand from any source (normal or “shadow”). They point to things like permanent 30% unemployment sapping all future demand and spiraling cycles of price declines due to increased supply. There is no consideration of the impact of price elasticity of demand or other basic concepts that impact the supply/demand relationship among these zealots.

I agree that there will be significant supply coming from recycled homes over the next couple of years due to foreclosures. But to understand its impact on price one has to compare this rate of recycled homes to demand as well as to the potential for displacing new-built product with recycled product.

[(former)FormerSanDiegan]

[quote=CA renter]
An example of “shadow demand” would be the existence of 500 million Chinese with massive amounts of USD who plan to buy up our real estate as the dollar crashes. That would be an unusual and extraordinary demand variable that would qualify as “shadow demand.” ;)[/quote]

Sure, let’s put the shadow Chinese buyers in the same category as the shadow inventory due to potential future NODs for prime ARM loans that reset in 2013.

You stated that all the items I point out are normal demand. My point is that shadow inventory zealots do not account for any possibility of increased demand from any source (normal or “shadow”). They point to things like permanent 30% unemployment sapping all future demand and spiraling cycles of price declines due to increased supply. There is no consideration of the impact of price elasticity of demand or other basic concepts that impact the supply/demand relationship among these zealots.

I agree that there will be significant supply coming from recycled homes over the next couple of years due to foreclosures. But to understand its impact on price one has to compare this rate of recycled homes to demand as well as to the potential for displacing new-built product with recycled product.

[(former)FormerSanDiegan]

[quote=CA renter]
An example of “shadow demand” would be the existence of 500 million Chinese with massive amounts of USD who plan to buy up our real estate as the dollar crashes. That would be an unusual and extraordinary demand variable that would qualify as “shadow demand.” ;)[/quote]

Sure, let’s put the shadow Chinese buyers in the same category as the shadow inventory due to potential future NODs for prime ARM loans that reset in 2013.

You stated that all the items I point out are normal demand. My point is that shadow inventory zealots do not account for any possibility of increased demand from any source (normal or “shadow”). They point to things like permanent 30% unemployment sapping all future demand and spiraling cycles of price declines due to increased supply. There is no consideration of the impact of price elasticity of demand or other basic concepts that impact the supply/demand relationship among these zealots.

I agree that there will be significant supply coming from recycled homes over the next couple of years due to foreclosures. But to understand its impact on price one has to compare this rate of recycled homes to demand as well as to the potential for displacing new-built product with recycled product.

[(former)FormerSanDiegan]

[quote=CA renter]
An example of “shadow demand” would be the existence of 500 million Chinese with massive amounts of USD who plan to buy up our real estate as the dollar crashes. That would be an unusual and extraordinary demand variable that would qualify as “shadow demand.” ;)[/quote]

Sure, let’s put the shadow Chinese buyers in the same category as the shadow inventory due to potential future NODs for prime ARM loans that reset in 2013.

You stated that all the items I point out are normal demand. My point is that shadow inventory zealots do not account for any possibility of increased demand from any source (normal or “shadow”). They point to things like permanent 30% unemployment sapping all future demand and spiraling cycles of price declines due to increased supply. There is no consideration of the impact of price elasticity of demand or other basic concepts that impact the supply/demand relationship among these zealots.

I agree that there will be significant supply coming from recycled homes over the next couple of years due to foreclosures. But to understand its impact on price one has to compare this rate of recycled homes to demand as well as to the potential for displacing new-built product with recycled product.

[jpinpb]

Are we also not going to consider the competition. Rents are still lower than buying. W/uncertainty in employment and housing, some may opt to rent. As much as I want a house, I refuse to go in over my head.

[jpinpb]

Are we also not going to consider the competition. Rents are still lower than buying. W/uncertainty in employment and housing, some may opt to rent. As much as I want a house, I refuse to go in over my head.

[jpinpb]

Are we also not going to consider the competition. Rents are still lower than buying. W/uncertainty in employment and housing, some may opt to rent. As much as I want a house, I refuse to go in over my head.

[jpinpb]

Are we also not going to consider the competition. Rents are still lower than buying. W/uncertainty in employment and housing, some may opt to rent. As much as I want a house, I refuse to go in over my head.

[Author]

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