Shadow Inventory – The Flood that May Never Come

[jpinpb]

A note on 3912 LDG that is not listed. That street has a number of NODs.

3956 LDG was pending for quite a while. The foreclosure was scheduled 2-23.

It seems to be in limbo.

There is a guy who apparently lives in Tiburon and went on a shopping spree down here. He’s got NODs on every place he owns.

But at least he’s trying to sell them:

3909 LDG

3913 LDG

11237 CC 6

[CA renter]

[quote=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).

[/quote]

Makes sense to me with two caveats:

1. You say that any non-distressed seller today is crazy. If I were a long-time owner and were concerned about the housing and stock markets (not even going into the default risk for municipal bonds, which so many seniors own…or the Treasuries that are yielding next to nothing), I’d seriously consider selling my still-bubble-priced home so I could move to a much cheaper location and preserve some of my equity.

In many areas, prices are still in bubble territory (post-2001 prices), and the market is HOT…this is the time to sell, not buy, IMHO.

2. That interest rates will remain low. I’ve been waiting for higher rates now for years, so concede that I’ve been terribly wrong for a long time, but someday it has to happen with all the printing going on, no?

[CA renter]

[quote=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).

[/quote]

Makes sense to me with two caveats:

1. You say that any non-distressed seller today is crazy. If I were a long-time owner and were concerned about the housing and stock markets (not even going into the default risk for municipal bonds, which so many seniors own…or the Treasuries that are yielding next to nothing), I’d seriously consider selling my still-bubble-priced home so I could move to a much cheaper location and preserve some of my equity.

In many areas, prices are still in bubble territory (post-2001 prices), and the market is HOT…this is the time to sell, not buy, IMHO.

2. That interest rates will remain low. I’ve been waiting for higher rates now for years, so concede that I’ve been terribly wrong for a long time, but someday it has to happen with all the printing going on, no?

[CA renter]

[quote=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).

[/quote]

Makes sense to me with two caveats:

1. You say that any non-distressed seller today is crazy. If I were a long-time owner and were concerned about the housing and stock markets (not even going into the default risk for municipal bonds, which so many seniors own…or the Treasuries that are yielding next to nothing), I’d seriously consider selling my still-bubble-priced home so I could move to a much cheaper location and preserve some of my equity.

In many areas, prices are still in bubble territory (post-2001 prices), and the market is HOT…this is the time to sell, not buy, IMHO.

2. That interest rates will remain low. I’ve been waiting for higher rates now for years, so concede that I’ve been terribly wrong for a long time, but someday it has to happen with all the printing going on, no?

[CA renter]

[quote=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).

[/quote]

Makes sense to me with two caveats:

1. You say that any non-distressed seller today is crazy. If I were a long-time owner and were concerned about the housing and stock markets (not even going into the default risk for municipal bonds, which so many seniors own…or the Treasuries that are yielding next to nothing), I’d seriously consider selling my still-bubble-priced home so I could move to a much cheaper location and preserve some of my equity.

In many areas, prices are still in bubble territory (post-2001 prices), and the market is HOT…this is the time to sell, not buy, IMHO.

2. That interest rates will remain low. I’ve been waiting for higher rates now for years, so concede that I’ve been terribly wrong for a long time, but someday it has to happen with all the printing going on, no?

[CA renter]

[quote=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).

[/quote]

Makes sense to me with two caveats:

1. You say that any non-distressed seller today is crazy. If I were a long-time owner and were concerned about the housing and stock markets (not even going into the default risk for municipal bonds, which so many seniors own…or the Treasuries that are yielding next to nothing), I’d seriously consider selling my still-bubble-priced home so I could move to a much cheaper location and preserve some of my equity.

In many areas, prices are still in bubble territory (post-2001 prices), and the market is HOT…this is the time to sell, not buy, IMHO.

2. That interest rates will remain low. I’ve been waiting for higher rates now for years, so concede that I’ve been terribly wrong for a long time, but someday it has to happen with all the printing going on, no?

[davelj]

[quote=CA renter]
Makes sense to me with two caveats:

1. You say that any non-distressed seller today is crazy. If I were a long-time owner and were concerned about the housing and stock markets (not even going into the default risk for municipal bonds, which so many seniors own…or the Treasuries that are yielding next to nothing), I’d seriously consider selling my still-bubble-priced home so I could move to a much cheaper location and preserve some of my equity.

In many areas, prices are still in bubble territory (post-2001 prices), and the market is HOT…this is the time to sell, not buy, IMHO.

2. That interest rates will remain low. I’ve been waiting for higher rates now for years, so concede that I’ve been terribly wrong for a long time, but someday it has to happen with all the printing going on, no?
[/quote]

1. I say “crazy,” because, what’s the point? You’re already down over 40% in most cases. Is the hassle and aggravation of moving worth it to miss the last couple of innings of this thing? I think most people will say “no.” Money’s important. But at some point, money can’t compensate for the aggravation. If you missed selling in 2004-2007 and you don’t have an issue with paying your mortgage, your life’s going to be easier if you just sit tight and wait this thing out. Just my opinion.

2. Some day interest rates will rise… but it could be a few years (or it could be a year – I don’t know).

[davelj]

[quote=CA renter]
Makes sense to me with two caveats:

1. You say that any non-distressed seller today is crazy. If I were a long-time owner and were concerned about the housing and stock markets (not even going into the default risk for municipal bonds, which so many seniors own…or the Treasuries that are yielding next to nothing), I’d seriously consider selling my still-bubble-priced home so I could move to a much cheaper location and preserve some of my equity.

In many areas, prices are still in bubble territory (post-2001 prices), and the market is HOT…this is the time to sell, not buy, IMHO.

2. That interest rates will remain low. I’ve been waiting for higher rates now for years, so concede that I’ve been terribly wrong for a long time, but someday it has to happen with all the printing going on, no?
[/quote]

1. I say “crazy,” because, what’s the point? You’re already down over 40% in most cases. Is the hassle and aggravation of moving worth it to miss the last couple of innings of this thing? I think most people will say “no.” Money’s important. But at some point, money can’t compensate for the aggravation. If you missed selling in 2004-2007 and you don’t have an issue with paying your mortgage, your life’s going to be easier if you just sit tight and wait this thing out. Just my opinion.

2. Some day interest rates will rise… but it could be a few years (or it could be a year – I don’t know).

[davelj]

[quote=CA renter]
Makes sense to me with two caveats:

1. You say that any non-distressed seller today is crazy. If I were a long-time owner and were concerned about the housing and stock markets (not even going into the default risk for municipal bonds, which so many seniors own…or the Treasuries that are yielding next to nothing), I’d seriously consider selling my still-bubble-priced home so I could move to a much cheaper location and preserve some of my equity.

In many areas, prices are still in bubble territory (post-2001 prices), and the market is HOT…this is the time to sell, not buy, IMHO.

2. That interest rates will remain low. I’ve been waiting for higher rates now for years, so concede that I’ve been terribly wrong for a long time, but someday it has to happen with all the printing going on, no?
[/quote]

1. I say “crazy,” because, what’s the point? You’re already down over 40% in most cases. Is the hassle and aggravation of moving worth it to miss the last couple of innings of this thing? I think most people will say “no.” Money’s important. But at some point, money can’t compensate for the aggravation. If you missed selling in 2004-2007 and you don’t have an issue with paying your mortgage, your life’s going to be easier if you just sit tight and wait this thing out. Just my opinion.

2. Some day interest rates will rise… but it could be a few years (or it could be a year – I don’t know).

[davelj]

[quote=CA renter]
Makes sense to me with two caveats:

1. You say that any non-distressed seller today is crazy. If I were a long-time owner and were concerned about the housing and stock markets (not even going into the default risk for municipal bonds, which so many seniors own…or the Treasuries that are yielding next to nothing), I’d seriously consider selling my still-bubble-priced home so I could move to a much cheaper location and preserve some of my equity.

In many areas, prices are still in bubble territory (post-2001 prices), and the market is HOT…this is the time to sell, not buy, IMHO.

2. That interest rates will remain low. I’ve been waiting for higher rates now for years, so concede that I’ve been terribly wrong for a long time, but someday it has to happen with all the printing going on, no?
[/quote]

1. I say “crazy,” because, what’s the point? You’re already down over 40% in most cases. Is the hassle and aggravation of moving worth it to miss the last couple of innings of this thing? I think most people will say “no.” Money’s important. But at some point, money can’t compensate for the aggravation. If you missed selling in 2004-2007 and you don’t have an issue with paying your mortgage, your life’s going to be easier if you just sit tight and wait this thing out. Just my opinion.

2. Some day interest rates will rise… but it could be a few years (or it could be a year – I don’t know).

[davelj]

[quote=CA renter]
Makes sense to me with two caveats:

1. You say that any non-distressed seller today is crazy. If I were a long-time owner and were concerned about the housing and stock markets (not even going into the default risk for municipal bonds, which so many seniors own…or the Treasuries that are yielding next to nothing), I’d seriously consider selling my still-bubble-priced home so I could move to a much cheaper location and preserve some of my equity.

In many areas, prices are still in bubble territory (post-2001 prices), and the market is HOT…this is the time to sell, not buy, IMHO.

2. That interest rates will remain low. I’ve been waiting for higher rates now for years, so concede that I’ve been terribly wrong for a long time, but someday it has to happen with all the printing going on, no?
[/quote]

1. I say “crazy,” because, what’s the point? You’re already down over 40% in most cases. Is the hassle and aggravation of moving worth it to miss the last couple of innings of this thing? I think most people will say “no.” Money’s important. But at some point, money can’t compensate for the aggravation. If you missed selling in 2004-2007 and you don’t have an issue with paying your mortgage, your life’s going to be easier if you just sit tight and wait this thing out. Just my opinion.

2. Some day interest rates will rise… but it could be a few years (or it could be a year – I don’t know).

[Eugene]

Perception is everything. If your average non-distressed seller perceives additional declines with no end in sight, he/she will try to get out, possibly list at a bubble price, resulting in high inventory (2008). If he/she starts seeing green shoots (even if they are largely imaginary), he/she will hold out.

[Eugene]

Perception is everything. If your average non-distressed seller perceives additional declines with no end in sight, he/she will try to get out, possibly list at a bubble price, resulting in high inventory (2008). If he/she starts seeing green shoots (even if they are largely imaginary), he/she will hold out.

[Eugene]

Perception is everything. If your average non-distressed seller perceives additional declines with no end in sight, he/she will try to get out, possibly list at a bubble price, resulting in high inventory (2008). If he/she starts seeing green shoots (even if they are largely imaginary), he/she will hold out.

[Eugene]

Perception is everything. If your average non-distressed seller perceives additional declines with no end in sight, he/she will try to get out, possibly list at a bubble price, resulting in high inventory (2008). If he/she starts seeing green shoots (even if they are largely imaginary), he/she will hold out.

[Author]

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