WatchMany areas are seeing a shortgage of inventory. Proof to the bulls that the market has bottomed. The true inventory is homes which have not been foreclosed on yet, not the current inventory for sale. When the robo-signing scandal became exposed in the late summer of 2010, many foreclosures were stalled in both judicial and non-judicial states. With the settlement this spring, the process is still jammed up. Current increases in home prices is due to an artificial decline in inventory. It is not a case of limited supply. Supply is still in the warehouse waiting to be put on the shelf. By the millions. Demand seems to be for the lowest price. The $60k home in Miami. What happens when the inventory hits the market but prices have already doubled? Demand will fall and inventory will be in excess.
Fannie Mae, which seems to be the bearer of most reo's these days, just released their earnings. They state:
"Our foreclosure rates remain high; however, foreclosures continue to proceed at a slow pace caused by continuing foreclosure process issues encountered by our servicers and changing legislative, regulatory and judicial requirements. The delay in foreclosures, as well as a net increase in the number of dispositions over acquisitions of REO properties, has resulted in a decrease in the inventory of foreclosed properties since December 31, 2010."
From the calculatedrisk blog: "The combined Real Estate Owned (REO) by Fannie, Freddie and the FHA declined to 202,765 at the end of Q2 2012, down from 209,077 in Q1, and down 18% from 249,501 in Q2 2012."
Notice inventory peaked when robo-signing hit. Is it now down 18% because all homes have been bought? All foreclosures behind us? All owners have equity and don't want to sell? Or, is inventory down because foreclosures have been stalled? I say the 18% decline is proof of how backed up foreclosures are. I say the spike going into the fall of 2010 shows what the real foreclosure pipeline looks like....
If Walmart limited its supply of milk and set a price of $15 a gallon, would you buy? If they slashed it to $7, would you now buy since it is down 50%? I guess many might take advantage of that great deal. The cynics among us know there are millions of gallons of milk waiting to be sold. We saw the price was steady at $3, and assume that is what the average customer can afford. We know the problem is not the lack of cows producing milk. It is the store refusing to put that milk on the market. Manipulation.
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Scottsdale, AZ
robertoaribas's website
% of mortgages 30 days or more late has also dropped. You can't have it both ways, if the banks own LESS foreclosures, and LESS people are late on their mortgages, there is evidence that the foreclosure crisis is easing.
Nobody is saying it is over, but if those numbers keep improving over the next couple of years, which in non judicial states they show every evidence of doing, expect the markets to have a much weaker headwind going forward.
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We'll see. If the flow of properties starts to pickup in the Fall, then perhaps, otherwise, this stinks of artificial manipulation.
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Goran_K says
NNOOOO !!! WHO would do such a thing ?
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Scottsdale, AZ
robertoaribas's website
yes, the same banks that drove themselves to bankruptcy, have now suddenly become brilliant...
and they are brilliantly letting people live free in homes that are deteriorating due to no repairs... brilliant business plan!
I have a great idea: buy homes, then let people live in them freely! you too can take advantage of everyone just like the banks do!!!!
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People always give way too much credit to conspiracy. If you people had any idea how dreadfully unorganized and incompetent and petty the leaders of all these companies really were you'd be ashamed to even imagine most these cabals possible.
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robertoaribas says
Yet the executives and presidents of these banks are living in Manhattan penthouses, and you're renting out shacks in the Phoenix desert. Again, I'm not trashing your business, but if these people were so stupid as you claim, then why are they so much richer than you?
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Randy H says
So... you're saying it would take some kind of genius to fail to sell foreclosed properties that he is in possession of? Seems to me pretty much any idiot could fail to do something.
This is not a complex scheme - the banks are simply sitting on inventory. It doesn't require them to meet in smoky back rooms to plot conspiracies.
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Homeboy says
I'm not disagreeing with you, but that same logic leads to the conclusion that the incompetence will result in a prolonged clearing of the system, not some sudden tsunami of inventory like many seem to wish for.
Most of the people running these banks and companies are not idiots, by the way. Far from it. They just don't play nice with their colleagues. High IQs, low EQs.
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"....People always give way too much credit to conspiracy....."
Let's bring back "mark to market" and see what the truth is.
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Scottsdale, AZ
robertoaribas's website
i see zero measurable evidence that the banks are "sitting on piles of foreclosures..."
nada.
People argue they are on the banks books at inflated values, well that is easy to check in big bank SEC filings... That fannie and freddie are sitting on them, also easy to check in government required financial statements.
The foreclosure process is slow, and muddled by changing legal requirements in many states, but no evidence of any type of collusive behaviour at all. Also no evidence that this will lead to a tsunami of foreclosures, but rather that the problem stretches out 1 or 2 years longer than it should have.
People argue that it is homes the banks aren't bothering to foreclose on, yet the SEC required filings on delinquient loans, you can reference another thread started today, is down a full percentage point from last year... So that isn't the case either.
I don't really care if the foreclosure process lasts longer, especially in juidicial states which AZ and California are not, because that doesn't mean something bad suddenly happens, it actually means we take an 8 year problem, and stretch it to 10 years... 2 more years for people who get foreclosed on to repair their credit, and buy another home....
Unless I see evidence of an oncoming tsunami of foreclosures, the rest of this is simply noise.
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Danville, CA
gregpfielding's website
robertoaribas says
This is also due to the thousands of mortgages now in various modification programs. It's too early to say for sure, but it's not unreasonable to expect eventual redefault rates north of 50%.
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Danville, CA
gregpfielding's website
gregpfielding says
Well said.
This may not be the free market many of us want. But it's the market we've got. Let's make the best of it.
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Most foreclosures are coming from GSE's like Fannie Mae. Fannie has admitted they nearly stopped all of their foreclosures during the robo-signing deal, in both judicial and non-judicial states. We will have to wait and see if they ramp up foreclosures, and whether they let the free market set the price, or sell them in bulk to government's hedgefund buddies.
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robertoaribas says
If anyone wants to take advantage of me and let me stay free in a nice home ---I'm right here. I would prefer to be taken advantage of in a beachfront Newport Beach mansion. If there is a Ferrari in the garage you can take even more advantage of me by letting me use it.
Thank You
Sucker Raw
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..... two items in the most recent quarterly 10-Q SEC filing from Fannie Mae opens the possibility that lenders may be intentionally holding back REO inventory from being listed.
The first item is found in the list of reasons that Fannie gives for only 22 percent of its REO inventory being listed for sale: Other, accounting for 5 percent of the total 78 percent that are not listed...... - 78 PERCENT OF FANNIE FORECLOSURES KEPT OFF THE MARKET!!!!!!
http://www.realtytrac.com/content/news-and-opinion/bank-owned-homes-not-listed-for-sale-7334
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gregpfielding says
Let's be honest, if even 20% of those cure, the banks themselves would be surprised.
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Cheeseus Sonofdog says
I guess you didn't read Fannie Mae's SEC filing link in the realtytrac article. Had you read it, you wouldn't have posted the above.
Let me break the bad news to you. Delinquency is on the decline. Fannie is making money now instead of losing billions like the past several years. Although we are not out of the woods yet, but things are moving in the right direction.
I know it's not what you want to hear, but that's the reality.