Shadow Inventory – The Flood that May Never Come

[no_such_reality]

Shadow inventory is more a gut check than hard measure. It has two primary components: foreclosures held by the banks that aren’t actively listed and the amorphous legions of people that want to sell but are either already upside down or unwilling to give it away cause they still think a rebound to 2006 prices is only a couple years away.

There is a quazi third piece, the foreclosure pipeline however that is really just the 2nd piece not getting their rebound in time to prevent them from becoming the 1st piece.

I honestly can’t tell you about Mira Mesa or many specific areas of SD, but in OC, the heavy selling areas post 2003 (OC is at 2003 pricing) have subtantial shadow inventory. You see it in the lack of homes for sale and a comparison to the low values and foreclosures.

Can they afford it? Maybe. But how long will a person hold on to a $700,000 loan when they can’t sell it for $450,000?

Of course, it does beg the obvious question, can they afford it? I don’t think so since foreclosure looks like a Christmas tree with the bulbs of NODs, NOTs, and REOs.

In the past, if you got into financial stress, you sold the house and salvaged what equity you could. If you upside down like the many of the buyers what do you do? Grind a short sale? That requires admitting that you really can’t afford it and in OC and parts of SD, conspicious consumption was the rule of the day.

The biggest roadblock to declining prices is the denial that we aren’t as rich as we pretend to be.

[temeculaguy]

AN, you definately have an inventory problem. I did a redfin on 92126 and there were 136 total listings (including fsbo’s, apartment buildings, basicly everything residential), of that about 50 were short sales. So it’s more than a third and it’s so hard to tell if a short has offers because they never make them inactive until escrow closes, due to the nature of short offers being non binding. Then I looked at the stats and trends and between april 14th and april 30th, there were 40 closings, so this represents a two week supply. Further, I looked at the freshest 40 listings and the age of the 40th was 53 days, comparing that to the 16 days it takes to sell that many, the trend is worsening, three places sell for each one that lists.

I understand that redfin is not the best way to analyze data and the sales data includes banks taking a house back so it can’t be relied upon but it’s best way to take the pulse for us non realtor types. It kinda balances out because active listings are many times not active, only a phone call can verify if there are offers and the strength of those offers, but you get a fair snapshot and you can extract out the shorts.

The real question is, if you were a bank and you were sitting on a vacant unlisted repo in mira mesa, why wouldn’t you list it right now, the wind is at your back and it may not stay that way.

[temeculaguy]

AN, you definately have an inventory problem. I did a redfin on 92126 and there were 136 total listings (including fsbo’s, apartment buildings, basicly everything residential), of that about 50 were short sales. So it’s more than a third and it’s so hard to tell if a short has offers because they never make them inactive until escrow closes, due to the nature of short offers being non binding. Then I looked at the stats and trends and between april 14th and april 30th, there were 40 closings, so this represents a two week supply. Further, I looked at the freshest 40 listings and the age of the 40th was 53 days, comparing that to the 16 days it takes to sell that many, the trend is worsening, three places sell for each one that lists.

I understand that redfin is not the best way to analyze data and the sales data includes banks taking a house back so it can’t be relied upon but it’s best way to take the pulse for us non realtor types. It kinda balances out because active listings are many times not active, only a phone call can verify if there are offers and the strength of those offers, but you get a fair snapshot and you can extract out the shorts.

The real question is, if you were a bank and you were sitting on a vacant unlisted repo in mira mesa, why wouldn’t you list it right now, the wind is at your back and it may not stay that way.

[temeculaguy]

AN, you definately have an inventory problem. I did a redfin on 92126 and there were 136 total listings (including fsbo’s, apartment buildings, basicly everything residential), of that about 50 were short sales. So it’s more than a third and it’s so hard to tell if a short has offers because they never make them inactive until escrow closes, due to the nature of short offers being non binding. Then I looked at the stats and trends and between april 14th and april 30th, there were 40 closings, so this represents a two week supply. Further, I looked at the freshest 40 listings and the age of the 40th was 53 days, comparing that to the 16 days it takes to sell that many, the trend is worsening, three places sell for each one that lists.

I understand that redfin is not the best way to analyze data and the sales data includes banks taking a house back so it can’t be relied upon but it’s best way to take the pulse for us non realtor types. It kinda balances out because active listings are many times not active, only a phone call can verify if there are offers and the strength of those offers, but you get a fair snapshot and you can extract out the shorts.

The real question is, if you were a bank and you were sitting on a vacant unlisted repo in mira mesa, why wouldn’t you list it right now, the wind is at your back and it may not stay that way.

[temeculaguy]

AN, you definately have an inventory problem. I did a redfin on 92126 and there were 136 total listings (including fsbo’s, apartment buildings, basicly everything residential), of that about 50 were short sales. So it’s more than a third and it’s so hard to tell if a short has offers because they never make them inactive until escrow closes, due to the nature of short offers being non binding. Then I looked at the stats and trends and between april 14th and april 30th, there were 40 closings, so this represents a two week supply. Further, I looked at the freshest 40 listings and the age of the 40th was 53 days, comparing that to the 16 days it takes to sell that many, the trend is worsening, three places sell for each one that lists.

I understand that redfin is not the best way to analyze data and the sales data includes banks taking a house back so it can’t be relied upon but it’s best way to take the pulse for us non realtor types. It kinda balances out because active listings are many times not active, only a phone call can verify if there are offers and the strength of those offers, but you get a fair snapshot and you can extract out the shorts.

The real question is, if you were a bank and you were sitting on a vacant unlisted repo in mira mesa, why wouldn’t you list it right now, the wind is at your back and it may not stay that way.

[temeculaguy]

AN, you definately have an inventory problem. I did a redfin on 92126 and there were 136 total listings (including fsbo’s, apartment buildings, basicly everything residential), of that about 50 were short sales. So it’s more than a third and it’s so hard to tell if a short has offers because they never make them inactive until escrow closes, due to the nature of short offers being non binding. Then I looked at the stats and trends and between april 14th and april 30th, there were 40 closings, so this represents a two week supply. Further, I looked at the freshest 40 listings and the age of the 40th was 53 days, comparing that to the 16 days it takes to sell that many, the trend is worsening, three places sell for each one that lists.

I understand that redfin is not the best way to analyze data and the sales data includes banks taking a house back so it can’t be relied upon but it’s best way to take the pulse for us non realtor types. It kinda balances out because active listings are many times not active, only a phone call can verify if there are offers and the strength of those offers, but you get a fair snapshot and you can extract out the shorts.

The real question is, if you were a bank and you were sitting on a vacant unlisted repo in mira mesa, why wouldn’t you list it right now, the wind is at your back and it may not stay that way.

[davelj]

Lemme lay some numbers on you folks and tell me what you think. I’m just kind of spitballing, but that’s what we do here.

There are currently around 13,000 properties on the SD MLS right now. About half are foreclosures, so around 6,500. Let’s assume – just for the sake of this discussion (and feel free to chime in if you think this is silly) – that there’s one “shadow” foreclosure (that is, not in the MLS) for every MLS foreclosure. So, that would put us at around 19,500 in REAL inventory.

Now, let’s further assume that we’re going to average more than 1,000 new foreclosures on the market each month through the end of the year, so we’ll make it 10,500 just to use a round number. And let’s also assume another 5,000 of non-foreclosure inventory to hit the market (crazy folks who shouldn’t be trying to sell their houses right now but are doing so anyway) through year end.

So, assuming zero sales, we’d end up with about 35,000 units of REAL inventory by year’s end (19,500 + 10,500 + 5,000), about 2/3s of which is foreclosed homes.

Through the first four months of this year, home sales are up 50% over 2008 in SD. If we assume that home sales – let’s go with resales alone – are up 40% over 2008 levels for the rest of the year, then that equates to about 25,000 sales between May and December.

35,000 – 25,000 = 10,000 units of REAL inventory at the end of the year (I’m excluding new home sales and new “new home” inventory, just to simplify things, although the beginning inventory figure includes some new homes).

That doesn’t seem like much inventory. And that’s assuming a LOT of foreclosure activity through the end of the year (more than we’ve seen in the last couple of months) as well as a pretty large shadow foreclosure inventory. So there’s some cushion in that number.

Don’t get me wrong, prices are still heading down… but it would appear at a much-reduced rate going forward. So long as rates remain relatively low, the sub-$300K foreclosures are getting sucked up faster than they’re being created. And since most folks who don’t have to sell in this environment aren’t bothering to try… the REAL inventory’s going to be tight for a while.

Anyhow, just an observation. Feel free to point out that my assumptions are nuts (although do us the favor of adding some explanation).

[davelj]

Lemme lay some numbers on you folks and tell me what you think. I’m just kind of spitballing, but that’s what we do here.

There are currently around 13,000 properties on the SD MLS right now. About half are foreclosures, so around 6,500. Let’s assume – just for the sake of this discussion (and feel free to chime in if you think this is silly) – that there’s one “shadow” foreclosure (that is, not in the MLS) for every MLS foreclosure. So, that would put us at around 19,500 in REAL inventory.

Now, let’s further assume that we’re going to average more than 1,000 new foreclosures on the market each month through the end of the year, so we’ll make it 10,500 just to use a round number. And let’s also assume another 5,000 of non-foreclosure inventory to hit the market (crazy folks who shouldn’t be trying to sell their houses right now but are doing so anyway) through year end.

So, assuming zero sales, we’d end up with about 35,000 units of REAL inventory by year’s end (19,500 + 10,500 + 5,000), about 2/3s of which is foreclosed homes.

Through the first four months of this year, home sales are up 50% over 2008 in SD. If we assume that home sales – let’s go with resales alone – are up 40% over 2008 levels for the rest of the year, then that equates to about 25,000 sales between May and December.

35,000 – 25,000 = 10,000 units of REAL inventory at the end of the year (I’m excluding new home sales and new “new home” inventory, just to simplify things, although the beginning inventory figure includes some new homes).

That doesn’t seem like much inventory. And that’s assuming a LOT of foreclosure activity through the end of the year (more than we’ve seen in the last couple of months) as well as a pretty large shadow foreclosure inventory. So there’s some cushion in that number.

Don’t get me wrong, prices are still heading down… but it would appear at a much-reduced rate going forward. So long as rates remain relatively low, the sub-$300K foreclosures are getting sucked up faster than they’re being created. And since most folks who don’t have to sell in this environment aren’t bothering to try… the REAL inventory’s going to be tight for a while.

Anyhow, just an observation. Feel free to point out that my assumptions are nuts (although do us the favor of adding some explanation).

[davelj]

Lemme lay some numbers on you folks and tell me what you think. I’m just kind of spitballing, but that’s what we do here.

There are currently around 13,000 properties on the SD MLS right now. About half are foreclosures, so around 6,500. Let’s assume – just for the sake of this discussion (and feel free to chime in if you think this is silly) – that there’s one “shadow” foreclosure (that is, not in the MLS) for every MLS foreclosure. So, that would put us at around 19,500 in REAL inventory.

Now, let’s further assume that we’re going to average more than 1,000 new foreclosures on the market each month through the end of the year, so we’ll make it 10,500 just to use a round number. And let’s also assume another 5,000 of non-foreclosure inventory to hit the market (crazy folks who shouldn’t be trying to sell their houses right now but are doing so anyway) through year end.

So, assuming zero sales, we’d end up with about 35,000 units of REAL inventory by year’s end (19,500 + 10,500 + 5,000), about 2/3s of which is foreclosed homes.

Through the first four months of this year, home sales are up 50% over 2008 in SD. If we assume that home sales – let’s go with resales alone – are up 40% over 2008 levels for the rest of the year, then that equates to about 25,000 sales between May and December.

35,000 – 25,000 = 10,000 units of REAL inventory at the end of the year (I’m excluding new home sales and new “new home” inventory, just to simplify things, although the beginning inventory figure includes some new homes).

That doesn’t seem like much inventory. And that’s assuming a LOT of foreclosure activity through the end of the year (more than we’ve seen in the last couple of months) as well as a pretty large shadow foreclosure inventory. So there’s some cushion in that number.

Don’t get me wrong, prices are still heading down… but it would appear at a much-reduced rate going forward. So long as rates remain relatively low, the sub-$300K foreclosures are getting sucked up faster than they’re being created. And since most folks who don’t have to sell in this environment aren’t bothering to try… the REAL inventory’s going to be tight for a while.

Anyhow, just an observation. Feel free to point out that my assumptions are nuts (although do us the favor of adding some explanation).

[davelj]

Lemme lay some numbers on you folks and tell me what you think. I’m just kind of spitballing, but that’s what we do here.

There are currently around 13,000 properties on the SD MLS right now. About half are foreclosures, so around 6,500. Let’s assume – just for the sake of this discussion (and feel free to chime in if you think this is silly) – that there’s one “shadow” foreclosure (that is, not in the MLS) for every MLS foreclosure. So, that would put us at around 19,500 in REAL inventory.

Now, let’s further assume that we’re going to average more than 1,000 new foreclosures on the market each month through the end of the year, so we’ll make it 10,500 just to use a round number. And let’s also assume another 5,000 of non-foreclosure inventory to hit the market (crazy folks who shouldn’t be trying to sell their houses right now but are doing so anyway) through year end.

So, assuming zero sales, we’d end up with about 35,000 units of REAL inventory by year’s end (19,500 + 10,500 + 5,000), about 2/3s of which is foreclosed homes.

Through the first four months of this year, home sales are up 50% over 2008 in SD. If we assume that home sales – let’s go with resales alone – are up 40% over 2008 levels for the rest of the year, then that equates to about 25,000 sales between May and December.

35,000 – 25,000 = 10,000 units of REAL inventory at the end of the year (I’m excluding new home sales and new “new home” inventory, just to simplify things, although the beginning inventory figure includes some new homes).

That doesn’t seem like much inventory. And that’s assuming a LOT of foreclosure activity through the end of the year (more than we’ve seen in the last couple of months) as well as a pretty large shadow foreclosure inventory. So there’s some cushion in that number.

Don’t get me wrong, prices are still heading down… but it would appear at a much-reduced rate going forward. So long as rates remain relatively low, the sub-$300K foreclosures are getting sucked up faster than they’re being created. And since most folks who don’t have to sell in this environment aren’t bothering to try… the REAL inventory’s going to be tight for a while.

Anyhow, just an observation. Feel free to point out that my assumptions are nuts (although do us the favor of adding some explanation).

[davelj]

Lemme lay some numbers on you folks and tell me what you think. I’m just kind of spitballing, but that’s what we do here.

There are currently around 13,000 properties on the SD MLS right now. About half are foreclosures, so around 6,500. Let’s assume – just for the sake of this discussion (and feel free to chime in if you think this is silly) – that there’s one “shadow” foreclosure (that is, not in the MLS) for every MLS foreclosure. So, that would put us at around 19,500 in REAL inventory.

Now, let’s further assume that we’re going to average more than 1,000 new foreclosures on the market each month through the end of the year, so we’ll make it 10,500 just to use a round number. And let’s also assume another 5,000 of non-foreclosure inventory to hit the market (crazy folks who shouldn’t be trying to sell their houses right now but are doing so anyway) through year end.

So, assuming zero sales, we’d end up with about 35,000 units of REAL inventory by year’s end (19,500 + 10,500 + 5,000), about 2/3s of which is foreclosed homes.

Through the first four months of this year, home sales are up 50% over 2008 in SD. If we assume that home sales – let’s go with resales alone – are up 40% over 2008 levels for the rest of the year, then that equates to about 25,000 sales between May and December.

35,000 – 25,000 = 10,000 units of REAL inventory at the end of the year (I’m excluding new home sales and new “new home” inventory, just to simplify things, although the beginning inventory figure includes some new homes).

That doesn’t seem like much inventory. And that’s assuming a LOT of foreclosure activity through the end of the year (more than we’ve seen in the last couple of months) as well as a pretty large shadow foreclosure inventory. So there’s some cushion in that number.

Don’t get me wrong, prices are still heading down… but it would appear at a much-reduced rate going forward. So long as rates remain relatively low, the sub-$300K foreclosures are getting sucked up faster than they’re being created. And since most folks who don’t have to sell in this environment aren’t bothering to try… the REAL inventory’s going to be tight for a while.

Anyhow, just an observation. Feel free to point out that my assumptions are nuts (although do us the favor of adding some explanation).

[peterb]

The latest Mr Mortgage take on REO activity:
http://www.fieldcheckgroup.com/2009/05/08/5-7-mark-hanson-special-reo-investor-report/

[peterb]

The latest Mr Mortgage take on REO activity:
http://www.fieldcheckgroup.com/2009/05/08/5-7-mark-hanson-special-reo-investor-report/

[peterb]

The latest Mr Mortgage take on REO activity:
http://www.fieldcheckgroup.com/2009/05/08/5-7-mark-hanson-special-reo-investor-report/

[peterb]

The latest Mr Mortgage take on REO activity:
http://www.fieldcheckgroup.com/2009/05/08/5-7-mark-hanson-special-reo-investor-report/

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