patrick.net

"Some would strictly define shadow inventory as homes that have actually been foreclosed upon but not resold yet by the banks. The most conspiratorial of us believed that banks were indeed sitting on thousands of homes in an attempt to hold up prices. I was actually working with the banks at that time, selling REOs, and I can tell you this was never the case."

http://bayarearealestatetrends.com/2012/08/19/no-banks-arent-holding-the-shadow-inventory-they-never-were/

The real estate agent who occasionally unlocks doors to show me places called to check in after a few months. I told him I was fine and not interested in any of the crap on the market. He then blurted out that prices are NOT going down and there is no "shadow inventory" to which I had zero reply.

I had never discussed "shadow inventory" with him before. Maybe he's got too many clients reading this thread. Or he stalks his clients on Patrick.net. ;p

War says

Call it what you want. With 25 MILLION excess empty houses in the US today, why bother buying now? Buy later as prices continue to crater for 65% less.

Realtors are liars. Prices are falling.

gregpfielding says

I was actually working with the banks at that time, selling REOs, and I can tell you this was never the case."

Yes, and you know a lot more about these things than either CoreLogic or RealtyTrack who report more than 90% of REO inventory is kept off the market:

http://realestate.aol.com/blog/2012/07/13/shadow-reo-as-much-as-90-percent-of-foreclosed-properties-are-h/

Call it Crazy says

It's been quiet here without those past posts, don't start......

"Mr. War" sounds a lot like "Realtors Are Liars."

I think the author misunderstands what "Shadow Inventory" is.

This government has been doing all kinds of gimmicks just to keep people from foreclosing, all kinds of programs, rate reductions, etc... but that only lasts until money runs out.

And I tell you, it feels like the markets are overly saturated with all kinds of wanna be clueless investors and properties that plenty of people would rather give up on just to go move on with their lives.

I personally know "investors" who have lost money flipping houses over past year. That's a sign of a slow down.

dunnross says

gregpfielding says

I was actually working with the banks at that time, selling REOs, and I can tell you this was never the case."

Yes, and you know a lot more about these things than either CoreLogic or RealtyTrack who report more than 90% of REO inventory is kept off the market:

http://realestate.aol.com/blog/2012/07/13/shadow-reo-as-much-as-90-percent-of-foreclosed-properties-are-h/

Lies, damned lies, and statistics.

Further in the article, they admit that 48% of the homes not for sale are because they are still occupied or rented. Fannie and Freddie have been more willing to let existing renters continue to stay in the properties, beginning about a year ago.

They say that 10-15% of the REOs are actively for sale at any given time, implying that 85%-90% are purposely being held back. This is largely not the case. From the time a property is actually foreclosed upon, it can take anywhere from 3-6 months to get that property vacant, cleaned up, valued, and put up for sale. Considering how quickly most REOs are selling nowadays, it makes total sense that the lion's share of the REOs are in the prep process, versus those actually for sale.

There are also probably some REOs not going to market because they are going to be packaged and sold in bulk to institutional investors, a new program that started this year.

Usually the only time that a bank will hold a home it already owns is when there is a legal issue. Or perhaps a title issue. Vacant homes are a huge liability and banks want them off their books as quickly as possible.

There is another mistake in the article. It says that banks recognize the loss only when the home is resold. The bank actually recognized the loss at the time of foreclosure, assuming that the foreclosure "sale" amount was lower than the note, which it almost always is. Any additional losses or gains against that number are recognized at resale.

For some more insight on shadow inventory, I would recommend reading some of Sean O'Toole's posts from ForeclosureRadar. I trust his insight far more than the dudes at CoreLogic or RealtyTrac

http://www.foreclosuretruth.com/blog/sean/shadow-inventory-confusion-reigns/

http://www.foreclosuretruth.com/blog/sean/the-swell-is-huge-no-waves-in-sight/

freak80 says

Then again, most houses I saw in the Bay Area were not worth much more than 50k-100k if talking structure alone.

I absolutely agree. 50k-100K = -50K for the structure. That would be the cost to tear it down to just get access to the land. Remind me of the home owner I talked to back in 1999 when I was interested in buying in the BA. A house in Redwood City was forsale for $400K. Then across the street (I mean right across the street) there was a mirror lot for sale. I figured I would check it out so called up the realtor. The price, $500K! Huh, I told him I can get the same lot with a house for $400K across the street. To which he said, buying just the land would save me the trouble of tearing down the crappy house. Wow. Guess what, that house is still there today and probably would sell for double and actually should be worth half of the 1999 price. Termites have been munching for 13 years on the studs!

Ptiemann,

Let me try to understand it. Sean O'Toole has been saying there is no shadow inventory since November 2009, and there will be no waves of foreclosure insight? It's been almost 3 years now, and we're still talking about the same issue. Interesting.

Give it sometime. The BEARS will eventually be correct. Kind of like people calling for a housing bubble since 2000, and they were eventually correct in 2007. :)

RentingForHalfTheCost says

I absolutely agree. 50k-100K = -50K for the structure.

lol. I meant "50k to 100k" but I think you have a point!

War says

Eventually they'll be right.

Yes, except, only their children will know it.

robertoaribas says

Except in reality... In reality, as evidenced by case-shiller, and many other indices, prices in quite a few areas are increasing...

Only within the last 4-5 months, which even most agents will attribute to seasonality coupled with the low inventory. We'll see how things go the next 6 months.

War says

robertoaribas says

War says

Give it time. The perpetual bottom-calling by the Housing Pimps will continue. Eventually they'll be right.

Prices continue to fall in the mean time.

Except in reality... In reality, as evidenced by case-shiller, and many other indices, prices in quite a few areas are increasing...

The reality is a few months of peak seasonality is being misrepresented as the trend by you realtors.

Now why would you realtors do that?

And why would you continue to keep dodging your bans only to post the same exact things over and over again?

War says

Bigsby says

And why would you continue to keep dodging your bans only to post the same exact things over and over again?

And why would you continue to lie to the public over and over again?

Are you a Liar?

I see your auto-response machine is still functioning.

War says

Speaking of Liars......

Speaking of Realtors...

War says

Bigsby says

I see your auto-response machine is still functioning.

I see your lies are still flowing.

What lies would those be?

War says

Playing stupid merely makes you stupid.

Something you've mastered. Again, post some links to the things you think I've been lying about.

War says

Post some links to the the things you believe you've been truthful about.

Just read everything I post. Those are my opinions. Point to the ones where you think I'm lying. As we all know you'll just post some tautological comment or other, why not just explain what you think my views on housing are.

ptiemann says

Not to discredit the statement, but were you aware of these 2 articles' posting date? (2009 and 2010?)

Nothing, as far as how the bank view REOs, has changed since then. There are lots of programs to prevent (or delay) foreclosures, but once the bank owns them they want them off their books asap.

E-man says

It's been almost 3 years now, and we're still talking about the same issue. Interesting.

Because for three years (4 this fall) the conspiracy has only been speculated, never proven. Again, there is an enormous shadow inventory, but little of it is secret REOs.

War says

Playing stupid merely makes you stupid.

Call it Crazy says

gregpfielding says

Again, there is an enormous shadow inventory, but little of it is secret REOs.

That's because they are sitting in the Neverland between the filing of the NOD and Lis Pendens and the official court transfer back to the bank (specially in the judicial states). They sit empty, waiting to enter the official REO fleet!!!

Yes. I agree. That's been my point.

I'm just going to point out again that there are absolutely zero reasonably accurate statistics on mortgages that have not been paid on for one or more months, but have yet to receive a NOD.

Everyone wants stats proving or disproving shadow inventory, but those stats don't exist. If they did, there would be no threads arguing this subject.

At least in California, those homes are not empty. But many of them have 5 years of listing and delisting, accompanied by multiple listing price fluctuations that seemingly have no rhyme or reason........

The current arguments supporting the notion of a huge amount of shadow inventory very much carry the feel of those arguing we were in a bubble back in 2005.

gregpfielding says

E-man says

It's been almost 3 years now, and we're still talking about the same issue. Interesting.

Because for three years (4 this fall) the conspiracy has only been speculated, never proven. Again, there is an enormous shadow inventory, but little of it is secret REOs.

East Bay Real Estate Agent and Blogger

So Greg, where do you think we will go from here? Low inventory for years to come with home prices muddle along, or there will be a wave or waves of foreclosures hitting the market to drive prices lower, or foreclosures will be sold in bulk through the back door to institutional investors, or..........???

TIA for your response.

E-man says

o Greg, where do you think we will go from here?

Find a plot or a tear-down and build you a custom home. With costs what they are these days, you could build a fabalous house with a high dollar finish out.

HUD chief confirms there is no "shadow inventory":
http://www.latimes.com/business/money/la-fi-mo-shaun-goes-west-20120822,0,2090315.story

But I suppose that won't convince the paranoid conspiracy theorists on here.

wave9x says

But I suppose that won't convince the paranoid conspiracy theorists on here.

Thank GOD we cleared that up.

I guess I could post a link to Michael Olenick's site and then say something like, BUT I guess it won't convince all the Tru-Believers on here...bunny quotes and all...but that would be lame.

wave9x says

HUD chief confirms there is no "shadow inventory":

http://www.latimes.com/business/money/la-fi-mo-shaun-goes-west-20120822,0,2090315.story

But I suppose that won't convince the paranoid conspiracy theorists on here.

When new build commences, then I'll believe the short supply/no shadow inventory theories.

Rising prices + no inventory = a market ripe for new product.

That hasn't happened and I'm not sure if its the HUD Chief is stupid or if the HUD Chief is corrupt, but its probably both.

dodgerfanjohn says

When new build commences, then I'll believe the short supply/no shadow inventory theories.

In Los Angeles there aren't many more empty areas to build that are within an hour's drive of major employment centers.

Well, there are places to build if we can increase the density, but zoning regulations and NIMBYs it's hard to get that started.

and the exurbs that were popular for new tract housing builds in the last couple decades have been decimated by high gas prices.

The paychecks, bonuses, and campaign contributions continue to flow. As long as banks can borrow at negative real interest rates why screw up easy money by recognizing the losses and go bankrupt? Why not just stall and/or hoard properties and wait for home buyers with clean credit, mortgage insurance, and stars in their eyes? If you're a tbtf bank even being a slum landlord works to show a cash flow, launder new money, and qualify as a business in the eyes of the fed. The squatters are happy, the execs are happy, the corporations and their puppets are happy and the old folks with pensions are still getting checks. This could go on for a long time.

zesta says

In Los Angeles there aren't many more empty areas to build that are within an hour's drive of major employment centers.

Said everybody in 2006, right before the crash.

E-man says

So Greg, where do you think we will go from here? Low inventory for years to come with home prices muddle along, or there will be a wave or waves of foreclosures hitting the market to drive prices lower, or foreclosures will be sold in bulk through the back door to institutional investors, or..........???

I'd love to see a wave of foreclosures come through so we can get all of this behind us, but the reality is that Uncle Sam and the big banks aren't going to let it happen. They can control the number of foreclosures and how many trickle onto the market at any given time. Some will be sold in bulk. But I believe the game plan for the next few years is the same as the last: slowly foreclose on the homes you have to, keep inventory low, and drag this mess out as long as it takes.

This is bad news for buyers, investors, everyone who works in the industry, and even for sellers.

It's depressing.

HEY YOU posted this link on a separate thread. Not sure what to call these folks (well, one word does come to mind), but 31% of mortgagors are underwater. Low interest rates and other extend and pretend measures keep these folks 'trapped forever' in a prison of their own making.
Greg, not sure about this being bad for investors -- if the bubble was about common folk losing their shirts, the downslope is about a massive wealth transfer to the rent seeking class.

All news is good news just before an election, remember the tradition of the Greeenspan put.

Wait until after the election, when the promises evaporate and the props fall out

zesta says

dodgerfanjohn says

When new build commences, then I'll believe the short supply/no shadow inventory theories.

In Los Angeles there aren't many more empty areas to build that are within an hour's drive of major employment centers.

Well, there are places to build if we can increase the density, but zoning regulations and NIMBYs it's hard to get that started.

and the exurbs that were popular for new tract housing builds in the last couple decades have been decimated by high gas prices.

That's not exactly true. When proper demand exists, the building WILL take place. Take for example NELA. Tons of building there transforming garbage homes into sanitized IKEA flips. What was once gang ridden wasteland is now being turned into a new bastion of upper middle classdom.

However, that's not happening in appreciably larger areas and it's because the demand doesn't exist. If it did, you'd see the same construction in Lincoln Heights, El Sereno, Boyle Heights, and Pico Union.

There's plenty of neighborhoods in LA ready to gentrify. And don't give me that nonsense about how no one wants to live in gang wasteland. People said the same thing about Silver Lake, Echo Park, Atwater Viliage, Altadena, and Highland Park.

dodgerfanjohn says

There's plenty of neighborhoods in LA ready to gentrify.

Isn't most of LA a gang wasteland?

EBGuy says

HEY YOU posted this link on a separate thread. Not sure what to call these folks (well, one word does come to mind), but 31% of mortgagors are underwater. Low interest rates and other extend and pretend measures keep these folks 'trapped forever' in a prison of their own making.

Greg, not sure about this being bad for investors -- if the bubble was about common folk losing their shirts, the downslope is about a massive wealth transfer to the rent seeking class.

If the government allows refinancing with no docs, it will bail out a lot of underwater homeowners. Basically, it would cut their monthly mortgage payment by 1/3 to 1/2. Loan modification was designed with this intention, but it hasn't worked very well due to the fact that you must provide financial docs.

If HARP 3.0 passes, expect the "shadow inventory" to be shrunk significantly.

dodgerfanjohn says

That's not exactly true. When proper demand exists, the building WILL take place. Take for example NELA. Tons of building there transforming garbage homes into sanitized IKEA flips. What was once gang ridden wasteland is now being turned into a new bastion of upper middle classdom.

However, that's not happening in appreciably larger areas and it's because the demand doesn't exist. If it did, you'd see the same construction in Lincoln Heights, El Sereno, Boyle Heights, and Pico Union.

or more noteable in limited lands of San Francisco .. buildings taken down or converted to livable towers and lofts. Its has happened alot over the last 10-12 yrs.

wave9x says

HUD chief confirms there is no "shadow inventory":

http://www.latimes.com/business/money/la-fi-mo-shaun-goes-west-20120822,0,2090315.story

But I suppose that won't convince the paranoid conspiracy theorists on here.

I've learned over the last several years that anything the federal government (and federal reserve) says, you can pretty much count on the exact opposite being closer to the truth.

taxee says

The paychecks, bonuses, and campaign contributions continue to flow. As long as banks can borrow at negative real interest rates why screw up easy money by recognizing the losses and go bankrupt? Why not just stall and/or hoard properties and wait for home buyers with clean credit, mortgage insurance, and stars in their eyes? If you're a tbtf bank even being a slum landlord works to show a cash flow, launder new money, and qualify as a business in the eyes of the fed. The squatters are happy, the execs are happy, the corporations and their puppets are happy and the old folks with pensions are still getting checks. This could go on for a long time.

As Keynes said, "markets can stay irrational longer than investors can stay solvent"- though it should be modified to say "markets can be rigged longer than economically sensible families looking to buy a house can hold out for sanity to return to the markets". I guess that doesn't flow as well- I'll have to work on that one.