- This topic has 78 replies, 16 voices, and was last updated 12 years, 6 months ago by
sdrealtor.
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March 27, 2012 at 1:22 PM #740617March 27, 2012 at 1:55 PM #740620
Essbee
ParticipantJust curious about how accurate the estimates of shadow inventory really are, and where the info comes from…
When my husband and I recently interviewed realtors for the sale of our house, both came to the appointment assuming that we were underwater. They looked at our buying price in late 2006 and they seemed to have information either about our downpayment or our initial loans. We had bought with 15% down, and had taken a second mortgage for roughly $30K, which was the other 5% of a downpayment. In this way, we avoided PMI. We’re not sure where/how they got the info.
Anyway, neither agent seemed to know that we had paid off that 5% second mortgage about 2 years into our ownership. So, someone looking at us might have thought that we were “underwater” but in reality we weren’t. I wonder how many people like us are out there…
And yes, we sold a few weeks ago and we took a loss overall, losing some of our original downpayment, the second, and any of the money we had put into some improvements. Boo! However, after all was said and done, we still walked away with about $60K. [even if I consider our monthly payments as just “rent”, I think we probably lost about $70-75K overall… Sad, but we wanted to get out and move up before prices and interest rates start to rise.]
March 27, 2012 at 2:31 PM #740622sdrealtor
ParticipantLoans/Liens placed on the property should up in the tax records that we have access to. We dont know if the loans are interest only or whether they have been paid off. So they looked at the loans taken out and assumed the worst case scenario (1st mortgage not paid down and 2nd still intact).
March 27, 2012 at 4:05 PM #740635ParticipantBut shouldn’t the fact that the loan/lien is paid off be noted in public records as well?
If not, it seems like this method would WAY overestimate the number of people who are “underwater”.
March 27, 2012 at 4:18 PM #740636bearishgurl
Participant[quote=Essbee]But shouldn’t the fact that the loan/lien is paid off be noted in public records as well?
If not, it seems like this method would WAY overestimate the number of people who are “underwater”.[/quote]
Yes, but there is a 2-week to 3-month “lag time” between paying off a mtg and the lender filing a reconveyance. If the borrower took out a HELOC, there is no reconveyance filed if the loan is paid off unless the borrower (or lender) close the (zero-balance) account.
Don’t know if REALIST shows the actual documents filed. If it is similar to WestLaw, it will show the loan amount, lender, and date and recorder filing number of transaction but NOT the terms of the loan. Your realtor friends would then have no way of knowing whether your 2nd TD was paid off if it was a HELOC or if you had just paid it off within a couple of months of calling them for a listing appt.
March 27, 2012 at 4:23 PM #740637ParticipantJust curious about something, Essbee. Since you have now closed on your new property, do you think it was worth it to “move up” whilst losing $75K on your old property?
http://piggington.com/man_cave_ideas_testamonials
Why didn’t you want to wait a few years to sell and get out “clean” (w/o losing any equity)?
March 27, 2012 at 5:41 PM #740638briansd1
GuestSeems to me like losing $75k on a 2006 purchase, and being able to move up and take advantage of low interest rates now, is not bad at all.
I know people who’ve lost at lot more.
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She said that $30k was 5%, so 2006 purchase price was $600,000.
15% total downpayment was $90,000 which was her own money. And she walked away with $60,000. That’s only a $30,000, or 5% loss on the purchase price. (the other $45,000 are other things that she’s counting).
That’s pretty damn good. I’d take that deal if I had bought a house in 2006.
March 27, 2012 at 6:53 PM #740639SD Realtor
ParticipantEssbee most realtors simply use realist to make a quick and dirty assessment of what you owe. When you pay a loan off there is a deed of reconveyance issued. This is not anything that realist picks up. So no most realtors will not know what is paid off and what is not.
March 28, 2012 at 7:07 AM #740652Jazzman
Participant[quote=Essbee]Just curious about how accurate the estimates of shadow inventory really are, and where the info comes from…
[/quote]
Wildly inaccurate. Nobody seems to agree on a definition of the shadow inventory let alone where the numbers come from. However, no smoke without fire, and for as long as naysayers fan the flames, industry henchmen will douse the glowing embers. In the mean time, the truth will quietly slide off into the distance.March 28, 2012 at 8:09 AM #740655(former)FormerSanDiegan
ParticipantThere has been discussion about and much ado about shadow inventory for the past four years.
But, what’s wrong with looking at housing in terms of fundamentals: price/income ratios, price to rent, payment-to-rent. Also traditional inventory-based methods seem to be reasonably good indicators as well (months inventory).
To me the issue of Shadow inventory falls in the same category as other unknowns (a war or attack on Iran, terrorist attacks on US soil, hyperinflation, US bond defaults, gas prices, the Chargers firing Norv).
You can worry about these things, but there’s no real way to measure the likelihood of them happening.
Take the persistent threat of terrorism since 9/11. Yeah, it could happen and impact you personally, but I wouldn’t plan too much of my life around the next likely terrorist attack on US soil. As history shows, a decade of your life can go by …
If you completely ignore shadow inventory and simply look at prices, inventory and fundamentals I think you are better off.
March 28, 2012 at 9:37 AM #740662Participant[quote=FormerSanDiegan]…If you completely ignore shadow inventory and simply look at prices, inventory and fundamentals I think you are better off.[/quote]
I think we’re all trying to do this, FSD, but the drag of “shadow inventory” (that shouldn’t even be there at this late date) is insidiously artificially undervaluing many markets by trickling out below market short-sale closings. It is THESE closings that are ruining the comps for those homeowners who “played by the rules.”
I just went to dinner with “boomers” in their sixties last night who have had their beautifully remodeled SFR (bought early ’90’s) listed in one of SD’s finest urban ‘hoods for less than six months. They haven’t gotten any good offers and lowered their price by about $40K. That’s as far as they’re going. When I asked, they said, “we’re not giving it away. We have all the time in the world.” One of them still lives in the property and they’ve been divorced about 12 years!
Don’t ever underestimate the “holding-on” power of sellers (ESP a 59.5+ yo boomer) who can easily rent for a positive cash-flow (monthly income) into oblivion.
Perhaps two years ago, a buyer could have gotten a good deal on a thrashed REO but in recent months, the vast majority (taken back by Fannie) are marketed at a competitive price with “traditional sales” after which they have had an avg of $5,700 each spent on them on in rehab.
It is NOT generally the REOs that are cratering property values today (creating “sold comps” below 2002 values). It is the short sales.
There is no reason for this in a non-judicial foreclosure state such as CA. I blame the lenders for accepting these deep discounts and letting these homedebtors escape scot-free with their mattress cash and newer vehicles, etc (extracted from their “home equity”).
Again, lender malaise is the culprit here. Hopefully, in 2013, when the Mortgage Forgiveness Debt Relief Act of 2007 is over, homedebtors will think twice before strategically defaulting, since they will be again be paying income taxes on their forgiven “phantom income” (as it should be).
March 28, 2012 at 1:28 PM #740695Participantsorry for duplicate post
March 28, 2012 at 1:30 PM #740694ParticipantEdited to add: I was trying to quote bearishgurl but failed miserably…. reminder to self: it’s “quote” not “reply”.
It’s a fair question. I do think that it was worth it for the following reasons:
1) if we had waited for the price of house #1 to go up (to get our equity out), house #2 would have likely gone up, too.
2) more importantly, we were worried about the interest rates going up in the next few years. that alone could have priced us out of house #2.
3) we want our kids to start school in the new neighborhood. They are 3 and 1, so school is still 2 years away.
and of course the irrational…
4) we were simply excited about the new house/neighborhood and didn’t feel like waiting several more years to move in.March 28, 2012 at 1:45 PM #740700Participant[quote=briansd1]Seems to me like losing $75k on a 2006 purchase, and being able to move up and take advantage of low interest rates now, is not bad at all.
I know people who’ve lost at lot more.
*
She said that $30k was 5%, so 2006 purchase price was $600,000.
15% total downpayment was $90,000 which was her own money. And she walked away with $60,000. That’s only a $30,000, or 5% loss on the purchase price. (the other $45,000 are other things that she’s counting).
That’s pretty damn good. I’d take that deal if I had bought a house in 2006.[/quote]
your math is about correct. About 90K down, and about 30K more eventually paid out to pay off that second mortgage. And then the money we put into improvements. Then again, we got to enjoy those improvements for at least several years, so it’s not like you should really get to completely count them as a loss.
Of course I wish we wouldn’t have lost anything, but then I tell myself that if we had just rented from 2006-present, we would have had that $90 or $120K sitting in other investments and we would have been really stressed out back in 2008-2009 or so to watch it tank. Plus, we did get to enjoy our house for the past 5+ years, so that is worth quite a bit, too. Maybe not quite work $75K plus all of our monthly payments, but still a good experience as a first time homeowner.
March 28, 2012 at 1:45 PM #740701UCGal
Participant[quote=bearishgurl][quote=FormerSanDiegan]…If you completely ignore shadow inventory and simply look at prices, inventory and fundamentals I think you are better off.[/quote]
I think we’re all trying to do this, FSD, but the drag of “shadow inventory” (that shouldn’t even be there at this late date) is insidiously artificially undervaluing many markets by trickling out below market short-sale closings. It is THESE closings that are ruining the comps for those homeowners who “played by the rules.” [/quote]
I have a problem with saying that shadow inventory is artificially undervaluing the market. It’s PART (a large part) of the market. These same homes (many of them) were “artificially” inflating the market when they were purchased or refi’d during the boom years.
You can argue that the market is being manipulated by banks holding onto REOs or the various government interventions. And REO’s not on the market are part of most people’s definitions of shadow inventory. But you mention below market short sales… listing that are below market get bid up to market value.
But actual listings, actual short sales, actual REO sales… those are not artificial – they are real. Closing prices ARE the market. Regardless of whether it was a short sale or an organic sale.
Next you’ll be saying that an owner that needs to sell quickly because of a job relo is artificially undervaluing the market.
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