[rpachigo]

Real Estate Region Detail | Housing Watch

Inventory up 11% yoy.

[Daddys///M3]

I'm curious about the details. Short sale inventory (possibly soon to be REO inventory)? Private party listings? I have seen a few more non-distressed listings recently and they are priced to compete with the shorts and REO. Entry level? Luxury?

FWIW, an increase in inventory and a decrease in median prices is a good thing for me, as messed up as that sounds. I have 4 preapproved clients out shopping right now and they are having a difficult time finding properties either to make offers on or that will accept their offers (price points between $115,000 and $210,000). More homes to look at would certainly not hurt (glass is half full I suppose).

[olecapt]

It is not happening.

The crucial REO SFR inventory is now at about 4800 and still dropping. Total Available Inventory is at 15000. Total SFR sales are just shy of 3000. Pendings would indicate 3500 or more April sales....which will likely be an all time record for the month. At this point there is a pretty good chance that the year will be the best volume year ever surpassing 2004.

Price continue to march downward with the average at 173,000. Median will appear early next week. The REOs are going for a median of 142,000 and and average of 154,500.

We are now in a situation where the REO inventory is at 2 months and dropping. With the likely increase next month we are going to have a REO inventory around 1.7 months. And then it will get worse.

Sales are still 78% REO, 14% Normal and 7% short, The price on normal sales appears to be coming down faster than REOs at the moment though a large differential still exists.

GLVAR numbers should be out by Wednesday of next week.

[jjameson922]

I was just sent some very positive MLS information. Current pending sales over 9,000 units with 3,353 actual sales in the last 30 days. The last time the volume was that high was June, 2004 with 3,500 sales.

[Ulysses373]

We are now in a situation where the REO inventory is at 2 months and dropping. With the likely increase next month we are going to have a REO inventory around 1.7 months. And then it will get worse.

This feels to me like a very misleading way to phrase the amount available at any one time. Saying there's an inventory of 2 months makes it sound like, as someone who isn't in real estate, that in 2 months there will be no more available and if I want one I need to act now. I don't think that this is what you mean at all though since you say next month there'll still be a 1.7 month inventory.

Can you explain how you come up with these time figures and why they matter? Wouldn't the actual amounts (which you did include in your first paragraph) be much more important than a rate? Like saying we have 4800 inventory, but we're selling 3000 a month and next month we expect 2800 new REOs would feel like better information than saying we have a 2 month inventory since that doesn't imply that you're expecting new REOs.

[olecapt]

Originally Posted by Ulysses373

This feels to me like a very misleading way to phrase the amount available at any one time. Saying there's an inventory of 2 months makes it sound like, as someone who isn't in real estate, that in 2 months there will be no more available and if I want one I need to act now. I don't think that this is what you mean at all though since you say next month there'll still be a 1.7 month inventory.

Well it shouldn't. There are tons and tons of writings on buyers markets and sellers markets and all that. In general any RE market with less than 3 month of inventory is considered a sellers market. Two months is a very strong sellers market. Under two is an ultra sellers market.

What are the hallmarks of a sellers market? Well the big one is rising price. Demand is out of whack with more buyers than sellers. And normally it leads to sharply rising prices.

But we have the opposite. A sellers market where price continues to decline. Maybe not as strongly as two months ago but a couple of per cent per month is a huge downward trend.

So what have we? Basically an impossibility in a free market. So we are well into the through the mirror side of Wonderland.

So what next? Well the volume is going up. The price is going down and the inventory is shrinking. Carried to the logical extreme we are about to sell nothing (no inventory) and at a very low price (still going down) to everybody (rising volumes). My old Dad would have suggested that probably was not going to work out well.

]Can you explain how you come up with these time figures and why they matter? Wouldn't the actual amounts (which you did include in your first paragraph) be much more important than a rate? Like saying we have 4800 inventory, but we're selling 3000 a month and next month we expect 2800 new REOs would feel like better information than saying we have a 2 month inventory since that doesn't imply that you're expecting new REOs.

Actually you have gotten the point. It is reasonably close to impossible.

And it is the rates that tell you what happens next. As you look at the rates and realize they are not sustaimable you reach the conclusion that something must change...and relativey soon.

We don't really have 4700 REOs in active inventory. We have far less than that. In the 4700 are any number of overpriced and unsaleable items. Would you pay 200K for a 1500 SF place with black mold up the walls? All it needs is 100K to be livable. The real nujmber is probably less than 3000 units.

So what is really developing is a system where we are peeling off the REOs as soon as they appear. I have two clients at the moment waiting for the right item. We have tried for 3 or 4 each and missed. And we are bidding realistically.

Can a downward price trend continue in such circumstances? I don't think so. Pretty soon we run up against the wall.

Then again the lenders have ignored reality for at least the last 6 months. Can they continue to ship dollars with each resale? Sure they can...particularly with the Feds supplying the required dollars.

So who knows? Maybe the banks will be paying us to take the homes in 2010...because that is what happens if the trend runs to its limit.

[Ulysses373]

Thanks for the response, that makes it much clearer to me. But it also brings up a question. From your numbers, you believe it should be a sellers market because the inventory rate is low and that's making everything out of whack since prices are actually dropping. But the original post says the inventory is twice what you say it to be. Using that number (which would double your expected inventory rate), would it be closer to a buyers market and then be more in line with the price decreases that are being seen? Is there something they're counting (and also the market) as inventory that you're not?

[olecapt]

Originally Posted by Ulysses373

Thanks for the response, that makes it much clearer to me. But it also brings up a question. From your numbers, you believe it should be a sellers market because the inventory rate is low and that's making everything out of whack since prices are actually dropping. But the original post says the inventory is twice what you say it to be. Using that number (which would double your expected inventory rate), would it be closer to a buyers market and then be more in line with the price decreases that are being seen? Is there something they're counting (and also the market) as inventory that you're not?

'
It is a queston of which inventory. It is particularly interesting in that our numbers come from the same source.

And that is where you buyers of services get to vote. If you want to buy or sell RE do you want to believe a local who is good at this stuff...or some automaton in the net who could not care less?

Your choice.

[08grad]

I'm waiting. Sellers aren't willing to take a hit on their property's equity. Virtually every resale home listed on the market is above the price the owner paid for it back at the peak of the boom in 2006. Rather than lose tens of thousands of dollars, they take the hit on their credit report and walk away from the mortgage. In return the banks get screwed as they're forced to foreclose, which in turn ruins our market. The only properties listed at reasonable prices are short sales/foreclosures, and there will be no shortage of those the next 3 years. While the subprime mortgage fiasco is almost complete, that was only the start of this foreclosure crisis. We still have the Alt-A mortgages to reset, the Option ARMs to reset, as well as an increase in the Agency and Prime mortgages the next 3 years.

[olecapt]

Originally Posted by 08grad

I'm waiting. Sellers aren't willing to take a hit on their property's equity. Virtually every resale home listed on the market is above the price the owner paid for it back at the peak of the boom in 2006. Rather than lose tens of thousands of dollars, they take the hit on their credit report and walk away from the mortgage. In return the banks get screwed as they're forced to foreclose, which in turn ruins our market. The only properties listed at reasonable prices are short sales/foreclosures, and there will be no shortage of those the next 3 years. While the subprime mortgage fiasco is almost complete, that was only the start of this foreclosure crisis. We still have the Alt-A mortgages to reset, the Option ARMs to reset, as well as an increase in the Agency and Prime mortgages the next 3 years.

Well no. First off virtually every property that was purchased in 2006 is well under water...so any remaining equity would be because the owner came in with more than a third down. I doubt very much there are more than a small handful of places listed above their value in 2006. And note the pricing of non-distressed properties has been coming down faster than REPOs recently...so at least some seller are blinking.

There appears to be a developing shortage of REPOs. There are lots and lots of shorts but they still are selling at dismally small percentages.

And there is certainly still a steady stream of REPOs. But it appears smaller than the stream flowing out.

I doubt you will be hurt at all by waiting some more. But watch the market.

Something has to give soon.