The Ongoing Case-Shiller Fallacy/Shadow Inventory

[Arraya]

Methodology for the 7 million in shadow inventory.

San Diego’s delinquency rates are higher than the national average.

Modifications are showing a 50%+ re-default.

I wonder what percentage of delinquent try to Mod?

http://www.builderonline.com/blogs/postdetails.aspx?BlogId=thompsonsblog&PostId=89586

Adding fuel to the fire, the Amherst Securities Group released a report estimating that there’s a shadow inventory of 7 million homes that are either in foreclosure or destined to default. Amherst analyzed how often borrowers who miss one, two, or three payments on their mortgage are likely to recover, or eventually lose possession of their home. More often than not, borrowers who miss a payment on their home wind up losing it.

The “cure rate” for borrowers who are 90 or more days delinquent, for instance, is less than 1 percent. For borrowers who have missed two payments, it’s only 4.4 percent. And only 26.5 percent of borrowers who miss a single monthly payment eventually recover. The 7 million homes likely to reach foreclosure based on this analysis represent an additional 16 months of existing-home supply at current sales rates.

San Diego Numbers

And the number of defaults isn’t shrinking. Of the borrowers in San Diego County holding subprime loans, 38.31 percent were at least 60 days late on their mortgage payments as of the end of June, about the same as the delinquency level in March, according to First American CoreLogic.

But the category above subprime known as Alt-A — the higher-risk loans for good-credit borrowers — saw defaults increase between March and June. In that category, 27.18 percent of the borrowers were at least 60 days delinquent by the end of June, up from 25.41 percent in March.

And more prime borrowers are at least 60 days behind — 7.04 percent in June compared to 5.99 percent in March

So there is a logical way to get future inventory for SD.

“Cure rate” * # delinquent= Future inventory

Shadow is what does not show up in real inventory.

[Rt.66]

Good point jpinpb what do semantics matter when the end result is the same; pressure on RE prices.

There is a HUGE number of people we know are not making their payments and then there are no doubt many others like in your example who we may not see in foreclosure stats, both are bad for RE.

——————–

Lawrence goes renegade, confirms shadow or “foreclosures not for sale” inventory:

MIA San Diego Foreclosure Properties

After hearing the economist go back on forth on the issues, the local San Diego Realtors were ready for some concrete answers. The big question on everyone’s mind was, if foreclosures are rising, why don’t we have more San Diego foreclosure properties for sale? Mr. Yun confirmed that Fannie Mae, Freddie Mac, and other banks as well, are definitely holding back on releasing foreclosure inventory. “They are making a business decision” says Mr. Yun.

http://www.sdrealtypros.com/article/missing-san-diego-foreclosure-properties-for-sale/
————–

I think the head realtor describes shadow inventory and confirms it exists in San Diego in one fell swoop there.

[Rt.66]

Good point jpinpb what do semantics matter when the end result is the same; pressure on RE prices.

There is a HUGE number of people we know are not making their payments and then there are no doubt many others like in your example who we may not see in foreclosure stats, both are bad for RE.

——————–

Lawrence goes renegade, confirms shadow or “foreclosures not for sale” inventory:

MIA San Diego Foreclosure Properties

After hearing the economist go back on forth on the issues, the local San Diego Realtors were ready for some concrete answers. The big question on everyone’s mind was, if foreclosures are rising, why don’t we have more San Diego foreclosure properties for sale? Mr. Yun confirmed that Fannie Mae, Freddie Mac, and other banks as well, are definitely holding back on releasing foreclosure inventory. “They are making a business decision” says Mr. Yun.

http://www.sdrealtypros.com/article/missing-san-diego-foreclosure-properties-for-sale/
————–

I think the head realtor describes shadow inventory and confirms it exists in San Diego in one fell swoop there.

[Rt.66]

Good point jpinpb what do semantics matter when the end result is the same; pressure on RE prices.

There is a HUGE number of people we know are not making their payments and then there are no doubt many others like in your example who we may not see in foreclosure stats, both are bad for RE.

——————–

Lawrence goes renegade, confirms shadow or “foreclosures not for sale” inventory:

MIA San Diego Foreclosure Properties

After hearing the economist go back on forth on the issues, the local San Diego Realtors were ready for some concrete answers. The big question on everyone’s mind was, if foreclosures are rising, why don’t we have more San Diego foreclosure properties for sale? Mr. Yun confirmed that Fannie Mae, Freddie Mac, and other banks as well, are definitely holding back on releasing foreclosure inventory. “They are making a business decision” says Mr. Yun.

http://www.sdrealtypros.com/article/missing-san-diego-foreclosure-properties-for-sale/
————–

I think the head realtor describes shadow inventory and confirms it exists in San Diego in one fell swoop there.

[Rt.66]

Good point jpinpb what do semantics matter when the end result is the same; pressure on RE prices.

There is a HUGE number of people we know are not making their payments and then there are no doubt many others like in your example who we may not see in foreclosure stats, both are bad for RE.

——————–

Lawrence goes renegade, confirms shadow or “foreclosures not for sale” inventory:

MIA San Diego Foreclosure Properties

After hearing the economist go back on forth on the issues, the local San Diego Realtors were ready for some concrete answers. The big question on everyone’s mind was, if foreclosures are rising, why don’t we have more San Diego foreclosure properties for sale? Mr. Yun confirmed that Fannie Mae, Freddie Mac, and other banks as well, are definitely holding back on releasing foreclosure inventory. “They are making a business decision” says Mr. Yun.

http://www.sdrealtypros.com/article/missing-san-diego-foreclosure-properties-for-sale/
————–

I think the head realtor describes shadow inventory and confirms it exists in San Diego in one fell swoop there.

[Rt.66]

Good point jpinpb what do semantics matter when the end result is the same; pressure on RE prices.

There is a HUGE number of people we know are not making their payments and then there are no doubt many others like in your example who we may not see in foreclosure stats, both are bad for RE.

——————–

Lawrence goes renegade, confirms shadow or “foreclosures not for sale” inventory:

MIA San Diego Foreclosure Properties

After hearing the economist go back on forth on the issues, the local San Diego Realtors were ready for some concrete answers. The big question on everyone’s mind was, if foreclosures are rising, why don’t we have more San Diego foreclosure properties for sale? Mr. Yun confirmed that Fannie Mae, Freddie Mac, and other banks as well, are definitely holding back on releasing foreclosure inventory. “They are making a business decision” says Mr. Yun.

http://www.sdrealtypros.com/article/missing-san-diego-foreclosure-properties-for-sale/
————–

I think the head realtor describes shadow inventory and confirms it exists in San Diego in one fell swoop there.

[Arraya]

[quote=jpinpb]OK. FWIW, my friend (married couple) bought at peak (in Linda Vista). They decided to do a short sale and get out from under their depreciating overpriced condo. The short sale was successful after five months and sold for way less than peak (45% off and below 2001 price). Note: They did not make a payment for about 8 to 10 months. They did not get a NOD during that time.

Was this considered shadow/stealth inventory?

Are we deeming shadow/stealth inventory only properties w/NODs? I’ve seen places listed as short sales w/NODs and some short sales that didn’t have NODs yet. I’ve seen places w/NODs and foreclosure dates that still have not listed and some that eventually get bank owned and list.

Seems we don’t have a real definition for stealth/shadow inventory. To me, if it’s distressed and ends up eventually somehow to market, the end result has been a lower comp from peak for the most part. In the end, that ultimately reflects the outcome of this bubble.[/quote]

Setting aside a definition for shadow inventory. That Amherst calculation for what they call shadow inventory, really it’s just future inventory, is a really good indicator of future downward pressure.

You take the delinquency rates and multiply them by a cure rate, which is just a statistical probability of what is to come of mortgages at certain delinquency rates.

Following the delinquency rates you can extrapolate the amount of future defaults. In San Diego’s case it is going up dramatically. Prime and Alta-a just jumped up significantly. Which are the vast bulk of mortgages. So future downward pressure is increasing as fast as it’s ever been.

The only counter to that is Loan mods which have an over 50% failure and you can be sure that every person behind is not trying to get a loan mod. Probably just a fraction. So that is a negligible stat in my eyes. You mine as well ignore it. It’s just delayed and slightly lessened downward pressure.

The other daunting statistic is 43% of all mortgages, over a 250,000 are underwater in San Diego. That is an enormous strategic default risk. Which is a growing trend

Just looking at those two statistics should be enough to tell you what you need to know about the market.

When prices go down another 10-15% the percentage of underwater mortgages will be over 60%.

This is the default-ocalypse… If somehow the dollar remains world reserve currency, prices will get cut in half again.

If not we have much bigger problems than worrying about home prices.

[Arraya]

[quote=jpinpb]OK. FWIW, my friend (married couple) bought at peak (in Linda Vista). They decided to do a short sale and get out from under their depreciating overpriced condo. The short sale was successful after five months and sold for way less than peak (45% off and below 2001 price). Note: They did not make a payment for about 8 to 10 months. They did not get a NOD during that time.

Was this considered shadow/stealth inventory?

Are we deeming shadow/stealth inventory only properties w/NODs? I’ve seen places listed as short sales w/NODs and some short sales that didn’t have NODs yet. I’ve seen places w/NODs and foreclosure dates that still have not listed and some that eventually get bank owned and list.

Seems we don’t have a real definition for stealth/shadow inventory. To me, if it’s distressed and ends up eventually somehow to market, the end result has been a lower comp from peak for the most part. In the end, that ultimately reflects the outcome of this bubble.[/quote]

Setting aside a definition for shadow inventory. That Amherst calculation for what they call shadow inventory, really it’s just future inventory, is a really good indicator of future downward pressure.

You take the delinquency rates and multiply them by a cure rate, which is just a statistical probability of what is to come of mortgages at certain delinquency rates.

Following the delinquency rates you can extrapolate the amount of future defaults. In San Diego’s case it is going up dramatically. Prime and Alta-a just jumped up significantly. Which are the vast bulk of mortgages. So future downward pressure is increasing as fast as it’s ever been.

The only counter to that is Loan mods which have an over 50% failure and you can be sure that every person behind is not trying to get a loan mod. Probably just a fraction. So that is a negligible stat in my eyes. You mine as well ignore it. It’s just delayed and slightly lessened downward pressure.

The other daunting statistic is 43% of all mortgages, over a 250,000 are underwater in San Diego. That is an enormous strategic default risk. Which is a growing trend

Just looking at those two statistics should be enough to tell you what you need to know about the market.

When prices go down another 10-15% the percentage of underwater mortgages will be over 60%.

This is the default-ocalypse… If somehow the dollar remains world reserve currency, prices will get cut in half again.

If not we have much bigger problems than worrying about home prices.

[Arraya]

[quote=jpinpb]OK. FWIW, my friend (married couple) bought at peak (in Linda Vista). They decided to do a short sale and get out from under their depreciating overpriced condo. The short sale was successful after five months and sold for way less than peak (45% off and below 2001 price). Note: They did not make a payment for about 8 to 10 months. They did not get a NOD during that time.

Was this considered shadow/stealth inventory?

Are we deeming shadow/stealth inventory only properties w/NODs? I’ve seen places listed as short sales w/NODs and some short sales that didn’t have NODs yet. I’ve seen places w/NODs and foreclosure dates that still have not listed and some that eventually get bank owned and list.

Seems we don’t have a real definition for stealth/shadow inventory. To me, if it’s distressed and ends up eventually somehow to market, the end result has been a lower comp from peak for the most part. In the end, that ultimately reflects the outcome of this bubble.[/quote]

Setting aside a definition for shadow inventory. That Amherst calculation for what they call shadow inventory, really it’s just future inventory, is a really good indicator of future downward pressure.

You take the delinquency rates and multiply them by a cure rate, which is just a statistical probability of what is to come of mortgages at certain delinquency rates.

Following the delinquency rates you can extrapolate the amount of future defaults. In San Diego’s case it is going up dramatically. Prime and Alta-a just jumped up significantly. Which are the vast bulk of mortgages. So future downward pressure is increasing as fast as it’s ever been.

The only counter to that is Loan mods which have an over 50% failure and you can be sure that every person behind is not trying to get a loan mod. Probably just a fraction. So that is a negligible stat in my eyes. You mine as well ignore it. It’s just delayed and slightly lessened downward pressure.

The other daunting statistic is 43% of all mortgages, over a 250,000 are underwater in San Diego. That is an enormous strategic default risk. Which is a growing trend

Just looking at those two statistics should be enough to tell you what you need to know about the market.

When prices go down another 10-15% the percentage of underwater mortgages will be over 60%.

This is the default-ocalypse… If somehow the dollar remains world reserve currency, prices will get cut in half again.

If not we have much bigger problems than worrying about home prices.

[Arraya]

[quote=jpinpb]OK. FWIW, my friend (married couple) bought at peak (in Linda Vista). They decided to do a short sale and get out from under their depreciating overpriced condo. The short sale was successful after five months and sold for way less than peak (45% off and below 2001 price). Note: They did not make a payment for about 8 to 10 months. They did not get a NOD during that time.

Was this considered shadow/stealth inventory?

Are we deeming shadow/stealth inventory only properties w/NODs? I’ve seen places listed as short sales w/NODs and some short sales that didn’t have NODs yet. I’ve seen places w/NODs and foreclosure dates that still have not listed and some that eventually get bank owned and list.

Seems we don’t have a real definition for stealth/shadow inventory. To me, if it’s distressed and ends up eventually somehow to market, the end result has been a lower comp from peak for the most part. In the end, that ultimately reflects the outcome of this bubble.[/quote]

Setting aside a definition for shadow inventory. That Amherst calculation for what they call shadow inventory, really it’s just future inventory, is a really good indicator of future downward pressure.

You take the delinquency rates and multiply them by a cure rate, which is just a statistical probability of what is to come of mortgages at certain delinquency rates.

Following the delinquency rates you can extrapolate the amount of future defaults. In San Diego’s case it is going up dramatically. Prime and Alta-a just jumped up significantly. Which are the vast bulk of mortgages. So future downward pressure is increasing as fast as it’s ever been.

The only counter to that is Loan mods which have an over 50% failure and you can be sure that every person behind is not trying to get a loan mod. Probably just a fraction. So that is a negligible stat in my eyes. You mine as well ignore it. It’s just delayed and slightly lessened downward pressure.

The other daunting statistic is 43% of all mortgages, over a 250,000 are underwater in San Diego. That is an enormous strategic default risk. Which is a growing trend

Just looking at those two statistics should be enough to tell you what you need to know about the market.

When prices go down another 10-15% the percentage of underwater mortgages will be over 60%.

This is the default-ocalypse… If somehow the dollar remains world reserve currency, prices will get cut in half again.

If not we have much bigger problems than worrying about home prices.

[Arraya]

[quote=jpinpb]OK. FWIW, my friend (married couple) bought at peak (in Linda Vista). They decided to do a short sale and get out from under their depreciating overpriced condo. The short sale was successful after five months and sold for way less than peak (45% off and below 2001 price). Note: They did not make a payment for about 8 to 10 months. They did not get a NOD during that time.

Was this considered shadow/stealth inventory?

Are we deeming shadow/stealth inventory only properties w/NODs? I’ve seen places listed as short sales w/NODs and some short sales that didn’t have NODs yet. I’ve seen places w/NODs and foreclosure dates that still have not listed and some that eventually get bank owned and list.

Seems we don’t have a real definition for stealth/shadow inventory. To me, if it’s distressed and ends up eventually somehow to market, the end result has been a lower comp from peak for the most part. In the end, that ultimately reflects the outcome of this bubble.[/quote]

Setting aside a definition for shadow inventory. That Amherst calculation for what they call shadow inventory, really it’s just future inventory, is a really good indicator of future downward pressure.

You take the delinquency rates and multiply them by a cure rate, which is just a statistical probability of what is to come of mortgages at certain delinquency rates.

Following the delinquency rates you can extrapolate the amount of future defaults. In San Diego’s case it is going up dramatically. Prime and Alta-a just jumped up significantly. Which are the vast bulk of mortgages. So future downward pressure is increasing as fast as it’s ever been.

The only counter to that is Loan mods which have an over 50% failure and you can be sure that every person behind is not trying to get a loan mod. Probably just a fraction. So that is a negligible stat in my eyes. You mine as well ignore it. It’s just delayed and slightly lessened downward pressure.

The other daunting statistic is 43% of all mortgages, over a 250,000 are underwater in San Diego. That is an enormous strategic default risk. Which is a growing trend

Just looking at those two statistics should be enough to tell you what you need to know about the market.

When prices go down another 10-15% the percentage of underwater mortgages will be over 60%.

This is the default-ocalypse… If somehow the dollar remains world reserve currency, prices will get cut in half again.

If not we have much bigger problems than worrying about home prices.

[jpinpb]

Whatever term one prefers to use, shadow, stealth, short sale active, bank owned not listed, bank owned listed, low percentage distressed modified, 50% modified that re-defaults, the bottom line is that there is downward pressure and properties that are upside down. What will become of them and how they will get absorbed is, to me, more of a concern.

[jpinpb]

Whatever term one prefers to use, shadow, stealth, short sale active, bank owned not listed, bank owned listed, low percentage distressed modified, 50% modified that re-defaults, the bottom line is that there is downward pressure and properties that are upside down. What will become of them and how they will get absorbed is, to me, more of a concern.

[jpinpb]

Whatever term one prefers to use, shadow, stealth, short sale active, bank owned not listed, bank owned listed, low percentage distressed modified, 50% modified that re-defaults, the bottom line is that there is downward pressure and properties that are upside down. What will become of them and how they will get absorbed is, to me, more of a concern.

[jpinpb]

Whatever term one prefers to use, shadow, stealth, short sale active, bank owned not listed, bank owned listed, low percentage distressed modified, 50% modified that re-defaults, the bottom line is that there is downward pressure and properties that are upside down. What will become of them and how they will get absorbed is, to me, more of a concern.

[Author]

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