Shadow Inventory – The Flood that May Never Come

[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.

[Bob]

Banks are holding on to foreclosed properties, releasing them slowly, so as to start a bidding war. So far its working. But as interest rates climb (trust me, they will) there will be fewer positive cash flow properties on the market for investors, as well as fewer first timers who qualify for loans. That will reduce the demand later this year, and along with even higher unemployment numbers, the banks will once again be in a pickle…either they will dump the properties, or beg Obama for more assistance.

[Bob]

Banks are holding on to foreclosed properties, releasing them slowly, so as to start a bidding war. So far its working. But as interest rates climb (trust me, they will) there will be fewer positive cash flow properties on the market for investors, as well as fewer first timers who qualify for loans. That will reduce the demand later this year, and along with even higher unemployment numbers, the banks will once again be in a pickle…either they will dump the properties, or beg Obama for more assistance.

[Bob]

Banks are holding on to foreclosed properties, releasing them slowly, so as to start a bidding war. So far its working. But as interest rates climb (trust me, they will) there will be fewer positive cash flow properties on the market for investors, as well as fewer first timers who qualify for loans. That will reduce the demand later this year, and along with even higher unemployment numbers, the banks will once again be in a pickle…either they will dump the properties, or beg Obama for more assistance.

[Bob]

Banks are holding on to foreclosed properties, releasing them slowly, so as to start a bidding war. So far its working. But as interest rates climb (trust me, they will) there will be fewer positive cash flow properties on the market for investors, as well as fewer first timers who qualify for loans. That will reduce the demand later this year, and along with even higher unemployment numbers, the banks will once again be in a pickle…either they will dump the properties, or beg Obama for more assistance.

[Bob]

Banks are holding on to foreclosed properties, releasing them slowly, so as to start a bidding war. So far its working. But as interest rates climb (trust me, they will) there will be fewer positive cash flow properties on the market for investors, as well as fewer first timers who qualify for loans. That will reduce the demand later this year, and along with even higher unemployment numbers, the banks will once again be in a pickle…either they will dump the properties, or beg Obama for more assistance.

[an]

[quote=Bob]Banks are holding on to foreclosed properties, releasing them slowly, so as to start a bidding war. So far its working. But as interest rates climb (trust me, they will) there will be fewer positive cash flow properties on the market for investors, as well as fewer first timers who qualify for loans. That will reduce the demand later this year, and along with even higher unemployment numbers, the banks will once again be in a pickle…either they will dump the properties, or beg Obama for more assistance. [/quote]
You expect rates to climb by year end and sdrealtor seems to think rates might fall some more by year end. That would yield 2 very different market this winter. Only time will tell who’s right.

[an]

[quote=Bob]Banks are holding on to foreclosed properties, releasing them slowly, so as to start a bidding war. So far its working. But as interest rates climb (trust me, they will) there will be fewer positive cash flow properties on the market for investors, as well as fewer first timers who qualify for loans. That will reduce the demand later this year, and along with even higher unemployment numbers, the banks will once again be in a pickle…either they will dump the properties, or beg Obama for more assistance. [/quote]
You expect rates to climb by year end and sdrealtor seems to think rates might fall some more by year end. That would yield 2 very different market this winter. Only time will tell who’s right.

[an]

[quote=Bob]Banks are holding on to foreclosed properties, releasing them slowly, so as to start a bidding war. So far its working. But as interest rates climb (trust me, they will) there will be fewer positive cash flow properties on the market for investors, as well as fewer first timers who qualify for loans. That will reduce the demand later this year, and along with even higher unemployment numbers, the banks will once again be in a pickle…either they will dump the properties, or beg Obama for more assistance. [/quote]
You expect rates to climb by year end and sdrealtor seems to think rates might fall some more by year end. That would yield 2 very different market this winter. Only time will tell who’s right.

[an]

[quote=Bob]Banks are holding on to foreclosed properties, releasing them slowly, so as to start a bidding war. So far its working. But as interest rates climb (trust me, they will) there will be fewer positive cash flow properties on the market for investors, as well as fewer first timers who qualify for loans. That will reduce the demand later this year, and along with even higher unemployment numbers, the banks will once again be in a pickle…either they will dump the properties, or beg Obama for more assistance. [/quote]
You expect rates to climb by year end and sdrealtor seems to think rates might fall some more by year end. That would yield 2 very different market this winter. Only time will tell who’s right.

[an]

[quote=Bob]Banks are holding on to foreclosed properties, releasing them slowly, so as to start a bidding war. So far its working. But as interest rates climb (trust me, they will) there will be fewer positive cash flow properties on the market for investors, as well as fewer first timers who qualify for loans. That will reduce the demand later this year, and along with even higher unemployment numbers, the banks will once again be in a pickle…either they will dump the properties, or beg Obama for more assistance. [/quote]
You expect rates to climb by year end and sdrealtor seems to think rates might fall some more by year end. That would yield 2 very different market this winter. Only time will tell who’s right.

[davelj]

There are two great waves that are coming towards each other at the same time: deflation and inflation. (Full disclosure: I read that analogy somewhere and liked it – I can’t remember where I read it, however.) The Officialdom is trying to set policies such that when these waves finish crashing against each other, neither will have the upper hand and the seas will calm. The problem is that policy-making is simply too difficult – and the world of economics too complicated and random – for that outcome to be a high or even reasonable probability. Consequently, it is likely that one or the other will turn out to be stronger once these waves have finished colliding. I don’t know which will be the stronger in the short term. But I suspect that inflation will win out ultimately… but that could be several years down the road.

[davelj]

There are two great waves that are coming towards each other at the same time: deflation and inflation. (Full disclosure: I read that analogy somewhere and liked it – I can’t remember where I read it, however.) The Officialdom is trying to set policies such that when these waves finish crashing against each other, neither will have the upper hand and the seas will calm. The problem is that policy-making is simply too difficult – and the world of economics too complicated and random – for that outcome to be a high or even reasonable probability. Consequently, it is likely that one or the other will turn out to be stronger once these waves have finished colliding. I don’t know which will be the stronger in the short term. But I suspect that inflation will win out ultimately… but that could be several years down the road.

[davelj]

There are two great waves that are coming towards each other at the same time: deflation and inflation. (Full disclosure: I read that analogy somewhere and liked it – I can’t remember where I read it, however.) The Officialdom is trying to set policies such that when these waves finish crashing against each other, neither will have the upper hand and the seas will calm. The problem is that policy-making is simply too difficult – and the world of economics too complicated and random – for that outcome to be a high or even reasonable probability. Consequently, it is likely that one or the other will turn out to be stronger once these waves have finished colliding. I don’t know which will be the stronger in the short term. But I suspect that inflation will win out ultimately… but that could be several years down the road.

[davelj]

There are two great waves that are coming towards each other at the same time: deflation and inflation. (Full disclosure: I read that analogy somewhere and liked it – I can’t remember where I read it, however.) The Officialdom is trying to set policies such that when these waves finish crashing against each other, neither will have the upper hand and the seas will calm. The problem is that policy-making is simply too difficult – and the world of economics too complicated and random – for that outcome to be a high or even reasonable probability. Consequently, it is likely that one or the other will turn out to be stronger once these waves have finished colliding. I don’t know which will be the stronger in the short term. But I suspect that inflation will win out ultimately… but that could be several years down the road.

[Author]

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