We’re going to define ‘shadow inventory’ as anything on our list from foreclosure radar, which includes NODs, NOTSs, and REOs. There will probably be some homeowners who will find a way to cure their default, but there are probably just as many coming right behind them that haven’t made the list yet, so we’ll call it even.
Our new hire Richard Morgan compiled and sorted these, as he is becoming ‘at one’ with the foreclosure list, and bringing additonal product for our buyers’ consideration. I did some spot checks, and they look accurate. These are detached-only.
Consider the actual number of shadows, and how they relate (%) to current MLS inventory:
| Town or Area | Zip Code | FRadar | FR In MLS | Net ‘Shadow’ | MLS Act | % Inventory Incr. |
| RSF | both | |||||
| Del Mar | 92014 | |||||
| Carmel Vly | 92130 | |||||
| La Jolla | 92037 | |||||
| SD DT condos | 92101 | |||||
| Solana Bch | 92075 | |||||
| Encinitas | 92024 | |||||
| Carlsbad NW | 92008 | |||||
| Carlsbad SW | 92011 | |||||
| Carlsbad NE | 92010 | |||||
| Cardiff | 92007 | |||||
| Carlsbad SE | 92009 | |||||
| La Mesa | 91941 | |||||
| Santee | 92071 |
It appears that the higher-end areas don’t have that many foreclosures in the works, compared to active inventory. But you can contribute it more to that fact that their MLS inventories are sky-high, and nothing is selling, and/or folks in the tonier parts of town have more money/credit cards and are able to hold out.
Buyers for SE Carlsbad and Encinitas (92009 & 92024) should be elated to see a possible 100+ bank-owned houses coming to their inventories before long – hopefully!
We included La Mesa and Santee for our good friend lgs, but interesting to note how a couple of relatively blue-collar towns are faring. Will the same result trickle over to the coast?
So what does this do to the total inventory month over month and year over year? Are we up or is it down like other indices indicate?
And, it would be interesting to see what the fail rate is month over month, or, same property for NOD’s. How many homeowners get out of default and really are just working a loan-mod?
Not so sure about calling it “even”. None the less, an intersting attempt to pull back the curtain on the “shadow inventory”. It will also be interesting to see if the eagerly anticipated tsunami of bank foreclosures materializes.
Another reason that many of the more expensive parts of town don’t have many foreclosures is that many of the homes have been owned by the current owners for decades. For places like La Jolla, this is especially true.
Could you possibly include RB East & West (92127, 92128) and Rancho Penasquitos (92129) in your list?
Thanks!
Carmel Valley looks in great shape.
If you’re now taking requests, please add 92126 as well! 🙂
The unemployment rate in CA hit 11.2% in March.
http://www.edd.ca.gov/About_EDD/pdf/urate200904.pdf
Could you possibly include RB East & West (92127, 92128) and Rancho Penasquitos (92129) in your list?
I’ll second that request. Lot’s of stubborn sellers need a wake up call. New listing over the weekend in 92127 — Asking $25k over 2007 purchase price.
Thanks.
Any sense how many of these shadow properties get sold without getting to the MLS? There are many out there trying to become “at one” with this group which will high turnover over in the next 12-24 months. How many get snapped up before average Joe homebuyer even knows they exist?
Would like to see 92109 (Pacific Beach) as well!
can you do every zip code from tj to san francsico and email that to me ASAP?
thanks.
For those of us who are new to your blog, the more elementary you make the explanations the better. All the REO, ABC, acronyms are hard to understand.
My experience with the people in the high end zips is that they have many many resources (read money) that they can exhaust before defaulting on a loan. This may just restrict supply and keep prices high at the very high end. Essentially they can wait out the recession. So, technically prices are low right now in high end zips, though not many will sell into this market.
Yeah, that’s right, folks in the high end zips have many many resource such as their healthy stock portfolios, mutual funds, high yield money markets and oh wait a minute, nevermind.
There’s a discussion going on the pigg site right now about how a lot of shadow inventory might be due to nonpaying owners who don’t intend to sell, but just want to trigger a renegotiation of the terms of their mortgages. The bank lists the property as NOD/NOT, but the reason it never goes to sale is because it’s a waiting game to people who aren’t really going to leave, they just want to pay less for their house.
Thoughts?
I find it doubtful that “a lot” of this shadow inventory are owners who are looking for an angle to refinance. It’s a huge FICO score hit with that 120+ day late and they do need to provide proof of hardship and how the renegotiated mortgage will not end up in another NOD in the next 6 months. It’s not just “oh, I don’t like my interest rate and I paid too much for my house”.
Alice,
I’m sure that is happening, and I’ll add to that stories that I have heard:
Agent who defaulted on his house, and arranged a short sale with a cash buyer who pays agent/seller $100,000 outside of escrow. The agent was shopping it as such, and I looked it up, and sure enough, he found a buyer who paid all-cash. Not sure about the payola, but lender lost $500,000+.
Homeowners who cure their default at the last minute, or at least pay enough to convince lender to cancel trustee sale.
We’re working on additional zips.
To put it in perspective, 175 units of shadow inventory in Santee is 5.3 months of inventory, using March sales rate. Inventory we’re talking about includes NODs (some of which will take more than 5 months to hit the market as REOs). It would appear that blue collar zips are simply having a case of pig through the snake.
Did you make sure to exclude properties that are pending and properties that have already sold? I don’t know about ForeclosureRadar, but RealtyTrac is notorious for keeping properties in its database for months after the actual sale.
Great info as always! RB East & West (92127, 92128) are definitely interesting to me, a good number of short sales at decent discounts these days.
The agent/seller may have netted $100,000 outside of escrow. This should be easy enough for the IRS/FBI to track no?
I think we’re going to see more pursuit of the recourse loans – emailed in today from Don the broker:
Just wanted to give you a heads up that second mortgages and home equities are suing in court for their money on foreclosures here in Michigan, and time table is about 2 years from when they went into foreclosure. They seem to be waiting until after the property has been sold as a foreclosure then in the next few months they start the lawsuit.
JE-Depending on the original source of that $100k. If it was from work done under the table (anything from doing legit business work off the books so the taxman doesn’t see to drug money), there would be no trace, provided it’s actually cash (as in a big briefcase full of the stuff) and the agent/seller isn’t stupid enough to open a checking account with it.
Lots of sleaziness still going on, I’m sure.
Do you when are those Magnolia Estates in Carlsbad by Barratt will be sold?
Essentially they can wait out the recession.
Let’s see if they can wait out a depression.
“Buyers for SE Carlsbad and Encinitas (92009 & 92024) should be elated to see a possible 100+ bank-owned houses coming to their inventories before long – hopefully!”
EXACTLY. Bring the volume, lower the prices. I’m also happy Carmel Valley has 58 on the radar. Sure, it’s a low percentage of total inventory, but I check the MLS regularly and I’m sure most of the 221 homes listed don’t have a chance of selling within 90 days given their current list prices.
And what a wreck downtown is.
GREAT data jim!
Saw you on the news. You are the man, Jim.
And what a wreck downtown is.
I know it’s outside your stomping ground, Jim, but a piece on downtown would be very interesting. Everyone knows the tower condo fiasco gripped SD as firmly as everywhere else.
Not to be picky, but since you are taking requests, here are a couple if you ever have time:
1) Separate 92067 and 92091 (calling 92091 “Rancho Santa Fe” is like calling Mira Mesa “East La Jolla”). No true snob would ever buy in 92091 so would be interesting to see if one or the other has more distress
2) The 92075s have a lot of Ranch properties that show up as 92075 (due to school district?); would be great to get better color there between those two areas and see why some ostensibly RSF properties are showing up in Solana Beach
Note, ForeclosureRadars bank owned inventory only goes back 4 months. So not all REOs accounted for.
Also the listed field isn’t very accurate in some counties due to how they account for listings.
What I have found for looking up in Ventura County up north is for every 1 home on the market (or already sold) there are 2 that haven’t got on the market yet.
Thanks E.D.!
We are checking the listings from the MLS directly.
Thanks, Jim. Very interesting. I guess I should definitely look to keep some powder dry. The “nice house” is on its way–no rush, perhaps, now that I’m comfy in the townhouse. 🙂
Good deal JTR, that’s solid info.
What is amazing to me up in the areas around me is that only 1 in 10 homes are actually being auctioned when they hit their auction date, the rest are being postponed all the while Pre-foreclosures are building and active inventory is shrinking.
Agree that many people are delinquent in order to force the lenders’ hands. It’s pretty easy to show hardship, as many people are losing their jobs or taking a pay cut. Even the “safe” govt jobs are requiring pay cuts right now — many more to come, IMHO.
I’ve had people tell me that their lenders told them to stop paying in order to rework the mortgage. The lenders tend not to modify loans unless the borrower has already stopped paying. I wonder if there is a clause in the contract that triggers some benefit to the lender in this case…anyone know of something like this? Otherwise, why are they telling their customers to stop paying them???
Thanks for filling us in on re recourse loans, Jim. That’s very good news. No way those lenders should be hung out to dry as the FBs walk away with no consequences. Their credit was likely already bad, so any further credit hit won’t really matter, especially when “everybody else is doing it.”
JJ sent this along, a listing agent looking for a $15,000 kickback under the table:
http://www.up2daterealestate.com/2009/04/20/the-short-sale-shakedown-continues/
How can the second and thirds mortgages/HELOCs, etc. sue?
They have every right to go to the courthouse steps and bid higher that the first mortgage holder to “protect” themselves–if they think it’s worth it. Then they just have to pay the 1st and (try to) resell it.
But I haven’t heard of any even doing that–they’re just writing it off as a loss. They didn’t want to eat what they already have into it PLUS the 1st, in this poor market.
I don’t understand what recourse they have in this situation, but hey! I’m no lawyer….
Sometimes lenders can sue to get a deficiency judgment against the borrower for any loss they take on a loan. Their ability to do this varies widely by state and usually depends on things like the type of foreclosure (judicial or non-judicial) and the mortgage transaction (purchase money, refinance rate/term or refinance cash out).
Shoppingaround,
It’s all about recourse vs. non-recourse.
In California, a purchase-money loan is usually non-recourse (the lender is entitled to foreclose on the house, but cannot pursue the borrower any further). In some states, mortgages are recourse, so the deficiency follows the borrower even after the house is foreclosed on.
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Note that in some states (such as California) non-recourse laws apply only to “purchase money” loans (i.e. original home loans that are used to purchase property). Almost all HELOCs and home equity loans are considered recourse loans and lenders for these loans may sue borrowers to recoup loss. (Except in some cases where the second mortgage lender forces the foreclosure. See: HELOC Foreclosures). There has been some speculation that mortgage refinances do not constitute “purchase money” loans. However, there have been no cases to determine this issue one way or the other.
http://www.helocbasics.com/list-of-non-recourse-mortgage-states-and-anti-deficiency-statutes/
———————-
I’m guessing very few FBs realized they were trading non-recourse for recourse loans when they refi’d (especially if they “cashed-out”) and HELOC’d their homes.
This debt is selling in the secondary market right now, and I’m guessing some smart investors are going to start pursuing these borrowers over the next few years. They’re buying these loans for just a few cents on the dollar right now.
I’m sorry that all states don’t have recourse. Everyone should pay their debts. Not only that, they should be paying tax on the “forgiven” amounts.