CA Shadow Inventory

[Arraya]

Measuring future inventory without considering future demand is a fool’s game. Neither is predictable.

On the contrary. Not looking at trends and trajectories is foolish and one of severe denialism.

Trend 1: Pent up future inventory is building up. Easy to see with delinquency rates. Moving up quite fast. (Contributing factor unemployment, strategic walkers, some resets) Watch % upside down for future pent up inventory.

Trend 2: Unemployment is trending up (major contributing factor is credit contraction)

Trend 3: Credit is contracting and will do so for the foreseeable future (Major contributing factor defaults) According to Meredith Whitney only half way through.

Trend 4: Wages trending down making the mean a moving target in the future to the down side. This is quantifiable.

Trend 5: No new industry for job growth

Should we not look at these trends and extrapolate out? That is the wise thing to do?

They only thing keeping the whole shebang from not blowing up is accounting rules that allow banks to not count losses, which allows them to build up inventory.

The majority of the pain came in 2009, those losses have not be realized by the market yet. The record foreclosures just reported for Q3 are probably from late 2008. If you want to see what 2009 losses do to the market you wait until between Q4 2010 to Q2 of 2011.

[(former)FormerSanDiegan]

[quote=Arraya]

Should we not look at these trends and extrapolate out? That is the wise thing to do?
[/quote]

Sure, we should look at all those trends.

For example in 2004-2005 if one used current trends to extrapolate where the housing market and jobs were headed (extremely low unemployment, prices rising) one could have gotten themselves into a bit of trouble.

Shadow inventory is to bears what pent-up demand is to bulls. Both are loosely defined concept which have some truth to them but are impossible to measure.

If one wants to cite shadow inventory as a force on the markets they should be forced to address the potential of pent-up demand.

[(former)FormerSanDiegan]

[quote=Arraya]

Should we not look at these trends and extrapolate out? That is the wise thing to do?
[/quote]

Sure, we should look at all those trends.

For example in 2004-2005 if one used current trends to extrapolate where the housing market and jobs were headed (extremely low unemployment, prices rising) one could have gotten themselves into a bit of trouble.

Shadow inventory is to bears what pent-up demand is to bulls. Both are loosely defined concept which have some truth to them but are impossible to measure.

If one wants to cite shadow inventory as a force on the markets they should be forced to address the potential of pent-up demand.

[(former)FormerSanDiegan]

[quote=Arraya]

Should we not look at these trends and extrapolate out? That is the wise thing to do?
[/quote]

Sure, we should look at all those trends.

For example in 2004-2005 if one used current trends to extrapolate where the housing market and jobs were headed (extremely low unemployment, prices rising) one could have gotten themselves into a bit of trouble.

Shadow inventory is to bears what pent-up demand is to bulls. Both are loosely defined concept which have some truth to them but are impossible to measure.

If one wants to cite shadow inventory as a force on the markets they should be forced to address the potential of pent-up demand.

[(former)FormerSanDiegan]

[quote=Arraya]

Should we not look at these trends and extrapolate out? That is the wise thing to do?
[/quote]

Sure, we should look at all those trends.

For example in 2004-2005 if one used current trends to extrapolate where the housing market and jobs were headed (extremely low unemployment, prices rising) one could have gotten themselves into a bit of trouble.

Shadow inventory is to bears what pent-up demand is to bulls. Both are loosely defined concept which have some truth to them but are impossible to measure.

If one wants to cite shadow inventory as a force on the markets they should be forced to address the potential of pent-up demand.

[(former)FormerSanDiegan]

[quote=Arraya]

Should we not look at these trends and extrapolate out? That is the wise thing to do?
[/quote]

Sure, we should look at all those trends.

For example in 2004-2005 if one used current trends to extrapolate where the housing market and jobs were headed (extremely low unemployment, prices rising) one could have gotten themselves into a bit of trouble.

Shadow inventory is to bears what pent-up demand is to bulls. Both are loosely defined concept which have some truth to them but are impossible to measure.

If one wants to cite shadow inventory as a force on the markets they should be forced to address the potential of pent-up demand.

[analyst]

[quote=FormerSanDiegan]

For example, take analyst’s category #4
4. delinquent, NOD not issued, no short sale in progress .

These are a long way from being on the market. Maybe a couple years at the current pace. [/quote]

Only due to the government intervention rules. Shadow inventory is only of interest if you think there is a chance that government intervention will end. It will remain off the market and have no effect if government intervention continues at its current level (or increases).

If mark-to-market were reinstated, and buyer incentives were curtailed, all enjoying government largesse would know it was ending, and ALL the shadow inventory would come quickly to market, REO’s as bulk sales or normal listings, the rest as short sales and foreclosures proceeding at normal pace. The aggregate increase in supply and reduction in demand would have a rapid and substantial effect on price.

But, again, there is not much point to trying to calculate and debate the unknowable size of shadow inventory, and its potential effect on prices unless you think government intervention will subside. I put that probability at near zero.

[analyst]

[quote=FormerSanDiegan]

For example, take analyst’s category #4
4. delinquent, NOD not issued, no short sale in progress .

These are a long way from being on the market. Maybe a couple years at the current pace. [/quote]

Only due to the government intervention rules. Shadow inventory is only of interest if you think there is a chance that government intervention will end. It will remain off the market and have no effect if government intervention continues at its current level (or increases).

If mark-to-market were reinstated, and buyer incentives were curtailed, all enjoying government largesse would know it was ending, and ALL the shadow inventory would come quickly to market, REO’s as bulk sales or normal listings, the rest as short sales and foreclosures proceeding at normal pace. The aggregate increase in supply and reduction in demand would have a rapid and substantial effect on price.

But, again, there is not much point to trying to calculate and debate the unknowable size of shadow inventory, and its potential effect on prices unless you think government intervention will subside. I put that probability at near zero.

[analyst]

[quote=FormerSanDiegan]

For example, take analyst’s category #4
4. delinquent, NOD not issued, no short sale in progress .

These are a long way from being on the market. Maybe a couple years at the current pace. [/quote]

Only due to the government intervention rules. Shadow inventory is only of interest if you think there is a chance that government intervention will end. It will remain off the market and have no effect if government intervention continues at its current level (or increases).

If mark-to-market were reinstated, and buyer incentives were curtailed, all enjoying government largesse would know it was ending, and ALL the shadow inventory would come quickly to market, REO’s as bulk sales or normal listings, the rest as short sales and foreclosures proceeding at normal pace. The aggregate increase in supply and reduction in demand would have a rapid and substantial effect on price.

But, again, there is not much point to trying to calculate and debate the unknowable size of shadow inventory, and its potential effect on prices unless you think government intervention will subside. I put that probability at near zero.

[analyst]

[quote=FormerSanDiegan]

For example, take analyst’s category #4
4. delinquent, NOD not issued, no short sale in progress .

These are a long way from being on the market. Maybe a couple years at the current pace. [/quote]

Only due to the government intervention rules. Shadow inventory is only of interest if you think there is a chance that government intervention will end. It will remain off the market and have no effect if government intervention continues at its current level (or increases).

If mark-to-market were reinstated, and buyer incentives were curtailed, all enjoying government largesse would know it was ending, and ALL the shadow inventory would come quickly to market, REO’s as bulk sales or normal listings, the rest as short sales and foreclosures proceeding at normal pace. The aggregate increase in supply and reduction in demand would have a rapid and substantial effect on price.

But, again, there is not much point to trying to calculate and debate the unknowable size of shadow inventory, and its potential effect on prices unless you think government intervention will subside. I put that probability at near zero.

[analyst]

[quote=FormerSanDiegan]

For example, take analyst’s category #4
4. delinquent, NOD not issued, no short sale in progress .

These are a long way from being on the market. Maybe a couple years at the current pace. [/quote]

Only due to the government intervention rules. Shadow inventory is only of interest if you think there is a chance that government intervention will end. It will remain off the market and have no effect if government intervention continues at its current level (or increases).

If mark-to-market were reinstated, and buyer incentives were curtailed, all enjoying government largesse would know it was ending, and ALL the shadow inventory would come quickly to market, REO’s as bulk sales or normal listings, the rest as short sales and foreclosures proceeding at normal pace. The aggregate increase in supply and reduction in demand would have a rapid and substantial effect on price.

But, again, there is not much point to trying to calculate and debate the unknowable size of shadow inventory, and its potential effect on prices unless you think government intervention will subside. I put that probability at near zero.

[Arraya]

[quote=FormerSanDiegan][quote=Arraya]

Should we not look at these trends and extrapolate out? That is the wise thing to do?
[/quote]

Sure, we should look at all those trends.

For example in 2004-2005 if one used current trends to extrapolate where the housing market and jobs were headed (extremely low unemployment, prices rising) one could have gotten themselves into a bit of trouble.

Shadow inventory is to bears what pent-up demand is to bulls. Both are loosely defined concept which have some truth to them but are impossible to measure.

If one wants to cite shadow inventory as a force on the markets they should be forced to address the potential of pent-up demand.[/quote]

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

[Arraya]

[quote=FormerSanDiegan][quote=Arraya]

Should we not look at these trends and extrapolate out? That is the wise thing to do?
[/quote]

Sure, we should look at all those trends.

For example in 2004-2005 if one used current trends to extrapolate where the housing market and jobs were headed (extremely low unemployment, prices rising) one could have gotten themselves into a bit of trouble.

Shadow inventory is to bears what pent-up demand is to bulls. Both are loosely defined concept which have some truth to them but are impossible to measure.

If one wants to cite shadow inventory as a force on the markets they should be forced to address the potential of pent-up demand.[/quote]

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

[Arraya]

[quote=FormerSanDiegan][quote=Arraya]

Should we not look at these trends and extrapolate out? That is the wise thing to do?
[/quote]

Sure, we should look at all those trends.

For example in 2004-2005 if one used current trends to extrapolate where the housing market and jobs were headed (extremely low unemployment, prices rising) one could have gotten themselves into a bit of trouble.

Shadow inventory is to bears what pent-up demand is to bulls. Both are loosely defined concept which have some truth to them but are impossible to measure.

If one wants to cite shadow inventory as a force on the markets they should be forced to address the potential of pent-up demand.[/quote]

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

[Arraya]

[quote=FormerSanDiegan][quote=Arraya]

Should we not look at these trends and extrapolate out? That is the wise thing to do?
[/quote]

Sure, we should look at all those trends.

For example in 2004-2005 if one used current trends to extrapolate where the housing market and jobs were headed (extremely low unemployment, prices rising) one could have gotten themselves into a bit of trouble.

Shadow inventory is to bears what pent-up demand is to bulls. Both are loosely defined concept which have some truth to them but are impossible to measure.

If one wants to cite shadow inventory as a force on the markets they should be forced to address the potential of pent-up demand.[/quote]

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

[Author]

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