Shadow Inventory

[don]

Banks aren't reselling many foreclosed homes

Carolyn Said, Chronicle Staff Writer
Wednesday, April 8, 2009

This isn't news to iTulipers except for the scale, finally documented by RealtyTrac. (emphasis added)

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.

Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.

"We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market," said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. "California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You'd have further depreciation and carnage."

In a recent study, RealtyTrac compared its database of bank-repossessed homes to MLS listings of for-sale homes in four states, including California. It found a significant disparity - only 30 percent of the foreclosures were listed for sale in the Multiple Listing Service. The remainder is known in the industry as "shadow inventory."

"There is a real danger that there is much more (foreclosure) inventory than we are measuring," said Celia Chen, director of housing economics at Moody's Economy.com in Pennsylvania. "Eventually those homes will have to be dealt with. If they're all put on the market, that will add more inventory to an already bloated market and drive down home prices even more."





Full article: http://www.sfgate.com/cgi-bin/articl...business&tsp=1

[GRG55]

Re: Shadow Inventory

Banks aren't reselling many foreclosed homes

Carolyn Said, Chronicle Staff Writer
Wednesday, April 8, 2009

This isn't news to iTulipers except for the scale, finally documented by RealtyTrac. (emphasis added)

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.

Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.

"We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market," said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. "California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You'd have further depreciation and carnage."

In a recent study, RealtyTrac compared its database of bank-repossessed homes to MLS listings of for-sale homes in four states, including California. It found a significant disparity - only 30 percent of the foreclosures were listed for sale in the Multiple Listing Service. The remainder is known in the industry as "shadow inventory."

"There is a real danger that there is much more (foreclosure) inventory than we are measuring," said Celia Chen, director of housing economics at Moody's Economy.com in Pennsylvania. "Eventually those homes will have to be dealt with. If they're all put on the market, that will add more inventory to an already bloated market and drive down home prices even more."





Full article: http://www.sfgate.com/cgi-bin/articl...business&tsp=1

Isn't the primary reason the banks have not put these on the market is that there is no market...just like the CDOs parked in a SIV, these particular regional or local housing markets have gone "no bid", haven't they?

[ricket]

Re: Shadow Inventory

And of course, they will be using the bailout money to pay the employees + real estate agents to "service" those homes in the normal fashion.

Had the banks gone out of business like they should have in the first place, there would be plenty of homes for sale that people could actually afford, and we wouldnt see people living in tent cities.

What a scam. I say "off with their heads" if they are so greedy they would rather see people suffer and starve than to admit they made a mistake and that home prices were absurd and ridiculously overpriced.

[MLM]

Re: Shadow Inventory

Isn't the primary reason the banks have not put these on the market is that there is no market...just like the CDOs parked in a SIV, these particular regional or local housing markets have gone "no bid", haven't they?

I suspect a bigger problem is simply corporate bandwidth to deal with the number of foreclosures. As far as a "no bid" situation, I don't think so. There is a bid (just like there is for CDO's, etc.), it just isn't a bid the bank likes.

[c1ue]

Re: Shadow Inventory

Isn't the primary reason the banks have not put these on the market is that there is no market...just like the CDOs parked in a SIV, these particular regional or local housing markets have gone "no bid", haven't they?

GRG,

I think the correct term is: the primary reason the banks have not put these on the market is that there is no market at the loan recovery price level.

Normally banks have an incentive to sell the houses even if losses are incurred because the capital tied up then cannot generate more cash. And even at mere 10:1 leverage levels, the losses have to be pretty traumatic before that happens - assuming the banks were making loans that were that bad to begin with.

Now with Bernanke and Geithner shoveling out the free cash - why bother to sell? The capital need is gone. Might as well hold out until the 'market recovers'.

One of the lessons from the Great Depression is that those with the most underwater loans were the last ones actually foreclosed on.

Because the banks foreclosed on those homes which could be sold for a profit first.

"Too big to fail" at a micro level...

[nero3]

Re: Shadow Inventory

Banks aren't reselling many foreclosed homes

Carolyn Said, Chronicle Staff Writer
Wednesday, April 8, 2009

This isn't news to iTulipers except for the scale, finally documented by RealtyTrac. (emphasis added)

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.

Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.

"We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market," said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. "California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You'd have further depreciation and carnage."

In a recent study, RealtyTrac compared its database of bank-repossessed homes to MLS listings of for-sale homes in four states, including California. It found a significant disparity - only 30 percent of the foreclosures were listed for sale in the Multiple Listing Service. The remainder is known in the industry as "shadow inventory."

"There is a real danger that there is much more (foreclosure) inventory than we are measuring," said Celia Chen, director of housing economics at Moody's Economy.com in Pennsylvania. "Eventually those homes will have to be dealt with. If they're all put on the market, that will add more inventory to an already bloated market and drive down home prices even more."





Full article: http://www.sfgate.com/cgi-bin/articl...business&tsp=1

It would be a great idea to let the federal reserve buy the homes. That would really solve the problem.

[we_are_toast]

Re: Shadow Inventory

This is the banks shadow inventory, what about the consumer shadow inventory? How many home owners out there are barely under water with their mortgage and would love to dump their house when the market recovers a little, and is this a scale that goes all the way up to the peak?

[CanuckinTX]

Re: Shadow Inventory

In a way you could say they did (but the banks are 'holding' the homes for the Fed). By providing the capital to the banks they no longer needed to sell their 'assets'. Then supposedly when they sell these homes one day they pay the money back.

Or is this what you were saying and I missed your sarcasm?

[GRG55]

Re: Shadow Inventory

I suspect a bigger problem is simply corporate bandwidth to deal with the number of foreclosures. As far as a "no bid" situation, I don't think so. There is a bid (just like there is for CDO's, etc.), it just isn't a bid the bank likes.

GRG,

I think the correct term is: the primary reason the banks have not put these on the market is that there is no market at the loan recovery price level...

I'm pretty sure I saw something around here a while back that there were auctions where the majority of homes did not attract any bid. Zero. Nada. Nil. Nothing.

I don't recall if there was some reserve price, but I don't think so. Maybe our ace archivist metalman can dig up the posting, or perhaps one of our resident real estate experts like SeanO can confirm if my recollection is correct.

[ax]

Re: Shadow Inventory

I'm pretty sure I saw something around here a while back that there were auctions where the majority of homes did not attract any bid. Zero. Nada. Nil. Nothing.

I don't recall if there was some reserve price, but I don't think so. Maybe our ace archivist metalman can dig up the posting, or perhaps one of our resident real estate experts like SeanO can confirm if my recollection is correct.

Certainly many failed auctions here in S. Florida....I'm not getting weekly ads for auctions at local hotels anymore. The asking prices were just too high.

[pwcmba]

Re: Shadow Inventory

sounds like a "cap" on housing prices for long time.

[Truefire]

Re: Shadow Inventory

You nailed it. Thats exactly what it is. Just more market manipulation. They are deceiving us for our own good.

This whole thing, every market, every enterprise, every industry is a F-in scam. I just want to vomit when I think of how corrupt everything is.

I truly welcome the end to this charade.

[SeanO]

Re: Shadow Inventory

I'm pretty sure I saw something around here a while back that there were auctions where the majority of homes did not attract any bid. Zero. Nada. Nil. Nothing.

I don't recall if there was some reserve price, but I don't think so. Maybe our ace archivist metalman can dig up the posting, or perhaps one of our resident real estate experts like SeanO can confirm if my recollection is correct.

Yes, 95% of homes taken to foreclosure auction (trustee sale) receive no 3rd party bid and go back to the bank. In CA we've seen 400,000 homes go back to the bank since Jan 07, and I estimate around 300,000 have been resold, leaving 100,000. The banks resold around 17,000 in February, but took back 17,000 thus no change in inventory. Most of the 100k homes sold in 2005-2006 when the median was $550k, its now $250k. Ouch.