Shadow Inventory (Phoenix, Mesa, Surprise: rentals, condo, homes)

[ReadyFreddy]

They are totally in that business. It seems counter to reason.

If banks are now in the business of making money off of REO, they're doing it very stupidly. If you owned one vacant, neglected house in some far away market and you wanted to make money on it, the first thing most people would do is put in the minimum repairs to make it appealing to buyers and list it asap. They wouldn't let it sit untended, generating no income but being a drain on their balance sheet, until the housing market turned around to their satisfaction. Especially if they are beholden to shareholders that insist they are in the business of banking, not real estate speculation, with the shareholders' money.

[jimj]

Originally Posted by jdahunt

I'm not saying your numbers are false......until I get my feet on the ground and see for myself I will withold anything like that.

My cousin who's been buying property for 25 years in Phoenix is telling me the same thing you are...but interestingly enough his wife who is a registered agent is agreeing with me.......about the shadow inventory.

My two trips last year to Phoenix we were still looking in Florida, so I didn't really get out and look. It is so obvious in Florida just driving down the stree and see so many empty houses that aren't even on the market.

Is it the same way in Phoenix, I don't have a clue.....you guys can answer that...do you see a lot of empty houses?

Here's the thing with this so-called "shadow inventory" that's supposedly floating around out there. If this exists (here) in any kind of large number why would the banks be holding it? From what I understand most of these banks are backstopped by the feds or insurance so they're not losing money when they sell a foreclosure.
Secondly, why on earth if prices are rising would whomever these evil people are release a bunch of inventory that'd drive prices down again which would go completely against their business model which is making MONEY and possibly put a whole new group underwater and start another cycle of foreclosures?
It just doesn't make sense unless you're into conspiracy theories.
If and that's a big "if" this inventory exists wouldn't it make more sense to release it in dribs and drabs as the market goes up so you don't affect the increase and keep making money?
After all, that is the business banks are in.

[sunluv]

Phoenix-area homebuyers squeezed out by investors

[khuntrevor]

I think, while the SFR market has stabilized, the condo market is still irrational. We know what happens when homeowners owe double what it is worth. The condo buyers from the boom, owe 4,5, and 6 times what their units are worth. The main reason they are worth so little, is the extreme difficulty encountered, when trying to finance a unit. With the exception of the cash buyers from the boom, I think you will see nearly complete turnover/default on the rest. My 22,000 purchase from 11-2009 grossed 6739 for 2011....very nice returns, zero phone calls. Condos can be great places to live, and are generally nicer than apartments. You rarely hear this Administration use the word "condominium"; maybe they think it's something you give 6th Graders, but they are an integral part of the overall housing market, and there is not even a proposed remedy to the situation. So, I do see part of the shadow inventory as a steady trickle of condo owners turning in their keys, and their units hitting a market that will not loan on them.

[khuntrevor]

Originally Posted by sunluv

Phoenix-area homebuyers squeezed out by investors

that was good read, way above average for Reagor. I thought the best point was that we will be normal, when traditional sales are receiving multiple offers. The Realtors have been spinning that multiple offer thing for three years......As some of us have stated here on C-D, most of it meant nothing more than absurdly low asking prices.

[whodiman]

Originally Posted by khuntrevor

that was good read, way above average for Reagor. I thought the best point was that we will be normal, when traditional sales are receiving multiple offers. The Realtors have been spinning that multiple offer thing for three years......As some of us have stated here on C-D, most of it meant nothing more than absurdly low asking prices.

This is the 2nd comment about Catherine Reagor. Does she normally not write good articles? or is she normally a bear?

[jdahunt]

I find this part of the article interesting....pretty much what I've been saying.

"Banks might boost supply of homes

Banks still hold many of the homes they took back through foreclosure in recent years; the rush to buy could push them to put more on the market"

[rjrcm]

Originally Posted by jdahunt

...I just find it interesting that basically these 4 local mls sites are so completely opposite from what you're saying Captain....if a realtor is projecting false data too me I would walk away from them asap and look for someone else to do business with.

I guess this will get answered in about 3 weeks...

Also keep in mind that many Realtor sites with an MLS search feature will count "Active" and "Active With Contingency" the same as "Active". This will inflate the number that appear available. Most of the AWC homes are short sales waiting for bank approval on accepted offers. You can only place offers on AWC homes in a backup position. Use a site such as mine or Captain Bills that will allow you to filter out AWC.

[sh9730]

RJRCM,

I do wish yours and Capn Bill's sites allowed to screen out age restriction though!

[Captain Bill]

Originally Posted by jdahunt

I find this part of the article interesting....pretty much what I've been saying.

"Banks might boost supply of homes

Banks still hold many of the homes they took back through foreclosure in recent years; the rush to buy could push them to put more on the market"

And the rest of the article is pretty much what the rest of us on the forum have been saying.

Everyone who is interested in buying a home, and buys into the shadow inventory and influx of REO's theory, please hold off buying until that happens. You will make it easier for my buyers to buy a home.

Here is some more information, and I hope it convinces the shadow believers to hold off buying:

19,191...Bank owned homes of all types in Phoenix Metro in May 2011
7,870....Bank owned homes as of March 7, 2012 (all types)
NOTE: Those are not guesstimates. They are factual numbers that come directly from the court house recorder, as compiled by the Cromford Report on a daily basis. The report I receive has all of the information on each home including the parcel number, name of bank, date taken back, address, pool, square footage, and more.

That amounts to 1,132 per month reduction in bank owned listings

Of the total 7,870 REO's above:

• 1,461 REO's Active on the MLS today.
• 155 REO's showing AWC (the listing agent is still marketing it while it's under contract)
• 106 REO's Listed, but Temporarily Off Market for some reason
• 2,473 REO's Pending (under contract in escrow)

That accounts for 4,195 of the total 7,870 inventory of REO homes
So where are the other 3,675 remaining REO's?

• It takes about 2 months to get an REO listed after it goes on the market. Therefore, we can estimate that about half, or 1,800 of those are in the pipeline and will become active within 60 days.
• The remaining 1,875 could be considered homes that for some reason the banks have elected to hold back.

Note that in the past 30 days there were 1,816 REO homes that sold and Closed Escrow.

At that rate, we can clean out that remaining 3,675 REO's in two months.

And, the banks only added 811 new Listings during the same past 30 days.

Therefore, if the banks are only adding 811 listings per month, and we're selling 1,816, could that mean that the trend of declining bank inventory from 19,191 in May to 7,870 today is continuing and that the shortage of these homes may be more severe within a couple months?

Regarding Notices of Trustee Sales:

There has been some increase, and some decreases in activity. Here is a report on that from the Cromford Report:

• Wells Fargo (up 36% from last year),
• Bank of New York Mellon (up 42%),
• US Bank (up 12%) and
• Green Tree Servicing up (1077%).

Most other lenders have shown a significant drop in notices from last year, including

• Bank of America (down 15%),
• Fannie Mae (down 65%), GMAC (down 48%),
• Aurora Loan Services (down 100%),
• Citibank (down 66%),
• JPMorgan Chase (down 21%),
• Deutsche Bank (down 16%) and
• Nationstar (down 35%).

Meanwhile, the trustee deeds are at their lowest level since February 2008 - 4 years ago.

January 2012... 10% of Arizona's (not Phoenix) had 10 .1% of home loans in some stage of delinquency or foreclosure.

The national average is 12.1%

• Arizona is 30th place for overall delinquency
• In Aug 2009, Arizona was in 4th place.
• That is not an insignificant improvement

3% of loans were in "foreclosure" in January 2012
4.2% is the national average

Arizona has the greatest percentage improvement in delinquency rates over the last 2 years.

Source=The Lender Processing Services Mortgage Monitor, where one can get much more info.

Click to enlarge the thumbnail below to see the chart wit the Foreclosure Pending trends.

Whenever a news media mentions a one liner about an influx in REO's, shadow inventory, etc, it should be backed up with facts to prove their statements.

The facts I'm showing do not support their statement of any pending influx of REO's. In fact it is just the opposite.