Here’s one more 16-page report on shadow inventory, with many charts and graphs:
http://matrix.millersamuel.com/wp-content/3q09/Amherst%20Mortgage%20Insight%2009232009.pdf
An excerpt:
The single largest impediment to a recovery in the housing market is the large number of loans that are either in delinquent status or in foreclosure that are destined to liquidate.
This creates a huge shadow inventory. We estimate this housing overhang at 7 million units, or 135% of a full year of existing home sales.
We look at the impact on a number of local markets, then look to the causes of the overhang:
1. Transition rates are high,
2. Cure rates are low, and
3. Loans (foreclosures) are taking longer to liquidate.
We are concerned that, in light of this housing overhang, the stabilization we have seen in home prices the last few months is temporary.
They’ve identified the big picture, and used Riverside as a test case. Let’s take our own look at Carmel Valley, 92130, which is a pertinent test for a couple of reasons; 1) it’s housing stock is mostly newer tract houses, and a more-homogenous sample should run truer, and 2) it has been one of the best performers so far. You can probably guess that your favorite surrounding areas may be faring somewhat worse.
Current MLS detached and attached active listings: 242
ForeclosureRadar.com’s NODs, NOTs, and REOs list: 192
Duplicates: 58
Total Inventory 242 + 192 – 58 = 376
Month’s Worth of Inventory: 376/77 = 4.88 months – if we can assume low or no seasonality into September’s 77 closings. This report makes a big deal about seasonality, but I think in Carmel Valley there will be less seasonal effect this year due to lower pricing. Last year in 92130 the number of monthly sales for September through January were 46, 50, 31, 32, 32.
Of the 134 defaulted properties that aren’t on the MLS:
There are 10 bank-owned properties and 55 others on the auction list that aren’t on the MLS. Let’s assume that ALL 65 of those will make it to market at some point over the next six months. (65)
Many of the unlisted 69 NODs are homeowners who have applied for a loan modification. How do I know this? I’ve knocked on their door, and close to 100% of the owners say it. But let’s assume that half will either get an acceptable loan modification, or go back to their original payments, rather than get foreclosed. Let’s be conservative and add 40 more of the NODs to the ‘future foreclosure’ roll. (40)
But let’s also include about 30 of the 58 that are trying to sell who will fail, and get foreclosed anyway. (30)
60 + 40 + 30 = 135 more houses and condos are ‘shadow inventory’, properties that aren’t on the open market currently, but should be in the next six months.
You can decide for yourself what the impact will be on 92130 with an extra 10-20 homes per month coming on the market. I think there are enough buyers waiting that they will all sell, it’s just a matter for how much. There are only 20 of the 198 detached active MLS listings that are under the magical $300/sf number on their list prices – you can bet the REOs will be right around there.
True, those who are delinquent but haven’t received an NOD yet are not in the count, but did they just got a later start than these folks? Most importantly, are the defaulters growing faster today than earlier in the year? If so, tack on more pain to your own opinion.
Here is the list – if you see one you’d like to pursue, contact me:
This data and your analysis again are spot on.
One more thing to consider is there is no guarantee the current banking enviornment will be able to stay the way it is another year. Gold prices are starting to pressure the fed into pushing up rates. If this happens house prices will fall. But the gov will probably bring out some new form of cheese to compensate. Sigh…
“Most importantly, are the defaulters growing faster today than earlier in the year? If so, tack on more pain to your own opinion.”
It very probable given San Diego’s horrible business climate. One of the largest employers just left town.
FYI- I live in that zip and couldn’t be persuaded to buy in Carmel Valley for all the tea in china. Virtually daily I see trustee sale notices tacked about the area. What foolish folks.
Even with tough times, many baby boomers will retire, want to down-size to a smaller place and add to supply of homes for sale.
I rent a house in Carlsbad. On Sunday, my daughter, my wife and I decided to take a bike ride on the bike path that cuts through Carmel Valley. We stopped in at an open house. The house right off Rt 56 was your typical 4 bedroom stucco with a small backyard patio area. The backyard overlooked a dry brook that was part of a golf course. You had a view of the golf course through the side window.
Hwy noise was obnoxious in the front of the house and not much better in the back. Realtor pointed out the windows of the front facing bedrooms were doubled paned and if you shut the doors and windows, well the noise would be tolerable.
Asking price – $870K+. Not where I’d like to dump my money.
Realtor asked if we were looking & I said not right away because we expect prices to drop significantly. But, he said, we couldn’t expect rates to stay as low as they were right now. I agreed that rates would be heading up.
As they head up they will affect affordability and house prices would drop.
He had a blank look on his face and we bid him farewell.
We might look seriously at buying next summer. No rush. Prices certainly won’t be heading up.