April 8th, 2009
Carolyn Said, Chronicle Staff Writer
“A vast “shadow inventory” of foreclosed homes that banks are holding off the market could wreak havoc with the already battered real estate sector, industry observers say.”"We believe that there are in the neighborhood of 600,000 properties nationwidethat banks have repossessed but not put on the market, “said Rick Sharga, vice president of RealtyTrac.”
May 19th, 2009
Blog posted by Peter Coy
“A new survey from Zillow.com confirms what I’ve been saying for months: There is a huge amount of “shadow inventory”in the housing market. Except the shadow is even bigger than I imagined.” According to Zillow’s VP for data and analytics, Stan Humphries, “Almost one-third of homeowners (31%) said they would be at least somewhat likely to put their homes on the market in the next 12 months if they saw signs of a recovering real estate market…We here at Zillow expect to see a long, drawn-out bottom, with any upward bumps in value tempered by new inventory coming into the market.”
July 21st, 2009
Real estate news and analysis from the Wall Street Journal
“…there are some signs that banks may be delaying foreclosures, either because they’re overwhelmed with a glut of delinquent loans or because they’re strategically holding off on over saturating the market. That so-called “shadow inventory” could lead to an uptick in foreclosure listings later this year.”
August 2nd, 2009
by CalculatedRisk, lifted from the comments on Corus: “Too toxic to fail” by Rob Dawg
“On shadow inventory from Reuters: “Shadow” inventory lurks over U.S. housing recovery
[A] massive supply of unsold homesis waiting in the wings and could easily swamp the recovery before it can gather speed. The number of homes listed officially on the market, while still at historically high levels, might be only the tip of the iceberg: said Stan Humphries, chief economist at real estate website Zillow.com in Seattle, Washington.”
September 30th, 2009
Quoted from Henry Blodget, CEO and Editor-in-Chief of The Business Insider
“Amherst Securities has produced a scary analysis of this “shadow inventory” overhang, which Amherst estimates is a shocking 7 million houses (The consensus is only 2-3 million). 7 million houses represents 1.4 times the number of houses currently sold in the country each year. So this represents a massive overhang. As these houses hit the market in future years, they will keep pressure on house prices. This will likely either lead to further declines in prices or delay the recovery.”
October 13th, 2009
from Homefront by Jim Wasserman and Dale Kasler
“There is no massive shadow inventoryof bank-owned repos – and banks aren’t intentionally holding them off the market. So says Foreclosure Radar’s Sean O’toole.”
October 15th, 2009
Written by Eric Wolff
“There is no shadow inventory; there is no bank conspiracy; there are not houses waiting like vine-ripened tomatoes for the moment to be plucked, says a recent report from ForeclosureRadar, a prominent data-tracking firm.”
I offer these quotes from various sites to show the progression of the “shadow inventory” issue. What I found fascinating is the wide variance of opinion. Experts in the field can’t agree, any more than the numbers that support their opinion. It seems to me, if they have been predicting this “glut” of homes to come on the market since (at the very least) the beginning of the year, and it hasn’t happened, it might be time to question the reality of “shadow inventory”. Interpret it as over-reaction, misinterpretation or simply wrong, the “shadow inventory” has yet to appear. Contrary to popular opinion and strange as it may be, we in Sacramento have more demand for foreclosures than we have foreclosures to sell. It is common to have many multiples of offers on each foreclosure. Foreclosure buyers have become accustom to the rejection of their offer – even when it offers over asking price. I, for one, do believe in fairy tales…and maybe this is one of them!
About the Author
Paula is a native Sacramentan, born and raised in South Land Park. She attended Sutterville Elementary School, Sam Brannan Middle School, C.K. McClatchy High School and received her Bachelor of Science at Oregon State University in 1974. Paula worked as a buyer of childrens wear at Lawrences, a local Land Park department store, for nine years and as the manager of a family owned Sacramento ski rack business for another 9 years. She and her husband, Richard moved into Land Park in 1979 and loved raising their three children there. Their children now own their own homes in the Land Park area.
In 1995 Paula earned both her real estate license and broker's license. She is privileged to be a member of the Sacramento Association of Realtors Master's Club, selling more than 3 million dollars worth of property each year since 1996. Paula enjoys being the Chairperson of the Grievance Committee for the Sacramento Association of Realtors and Broker of record for Windermere Dunnigan Realtors in Land Park.
Paula is fortunate to live and work in the area in which she specializes - Land Park. She also specializes in the older neighborhoods of East Sacramento and Curtis Park. Paula is drawn to the character and the unique architecture of the homes in these tree-canopied neighborhoods featuring beautiful parks. Growing up in South Land Park, she also has experience in selling homes in this wonderful established neighborhood.
When Paula is not working
with clients, she enjoys walking her two unruly English Springer Spaniels
in William Land Park, working in her yard or the latest home project,
creating bronze sculptures or playing with her
grandchild.
Paula Swayne
4215 Freeport Blvd.
Sacramento, California 95822
Direct: (916) 454-5753
Mobile: (916) 425-9715
Paula,
The Amhearst report was startling, but if you look at their reasoning, it is pretty sound. They look at the number of mortgages that are 30, 60, and 90 day late as well those in the foreclosure process. They then use the historical cure rate for loans in each stage. This led them to the 7 Million number. This number is staggering, but the only way this won’t happen is if the historical cure rate proves to be too large, and these people are able to begin paying the mortgage or get a modification. If we were seeing an increase in employment and the loans weren’t suspicious to begin with (liar loans/no doc/option ARM), it could happen, but that isn’t the case.
There are forces trying to slow the onslaught. The banks don’t want houses to come to market for obvious reasons. They can price the asset at 100% due to the current mark-to-market rules so they don’t realize a loss until they realize the loss. Plus, the Obama program will slow this process due to the five month trial period, and many states have foreclosure moratoriums in place. So, there are groups fighting the eventual foreclosure process.
While I understand the current number of foreclosures isn’t gargantuan, it doesn’t mean that there aren’t many coming down the road. I find many realtors are trying to dismiss the argument for the future uptick in foreclosures because it may keep buyers on the sidelines. I am not implying that you are making this claim, but the argument that foreclosures are not a problem seems to come from folks inside the real estate industry.
It seems that the only person (in your post) that doesn’t believe the “shadow inventory” is ForeclosureRadar. The fact is that banks are slowly releasing REO’s. It’s a slow leak. They are definitely trying to create a demand and it’s working. It’s not a conspiracy, it’s smart business (for them). It will however prolong the recovery. Think of the oil market. Supply and demand. You have to control the supply to increase the demand. If oil prices fall, they cut production. It’s simple and it’s a reality, that’s why they call it “shadow” because it’s not obvious. But it’s there and you can’t ignore it. YouWalkAWay.com tracks thousands of foreclosures and the banks postpone the sales over and over. These postponements are not at the homeowners request. The lenders aren’t even doing the work, it’s a 3rd party, so it’s not that they are overwhelmed. They are simply controlling supply and demand. Read about it more at blog.youwalkaway.com
My question is: Why they would do that? Why make a shadow inventory? What are the advantages to hide plenty of homes repossessed and do not sell them