Posted by Michael Howard on September 24, 2009 at 1:30pm
From MSN Money today. BofA and Wells Fargo have both been on the record stating that the "shadow inventory" does not exist. This is the third published report I have read that sates otherwise. As servicers continue to trickle product into the market there is a strong chance that this will prolong the housing slump for more than originally thought. The tsunami we have all heard about, while driving prices continually lower might rid the market of this distressed inventory faster and perhaps hasten a quicker recovery...Thoughts?Analysts say 7 million soon-to-be foreclosed properties have yet to hit the market.Posted by Elizabeth Strott on Thursday, September 24, 2009 8:59 AMAny optimists touting a housing recovery might want to pause and think about this: Amherst Securities Group analysts believe the market faces another major hurdle because about 7 million properties that are likely to be seized by lenders have yet to hit the market.The "huge shadow inventory" reflects mortgages already being foreclosed upon or now delinquent and likely to be and, assuming no other properties are on the market, it would take 1.35 years to sell this inventory based on the current pace of existing-home sales, analyst Laurie Goodman wrote in a note to clients.In 2005, there were 1.27 million properties in the same situation.There have been a number of recent economic reports hinting at a recovery for the housing market. In May and June, the S&P/Case-Shiller 20-city index of home prices rose, the first month-over-month increases in values since 2006. Prices for U.S. homes rose by 0.3% in July from June, the Federal Housing Finance Agency reported earlier this week."The favorable seasonals will disappear over the coming months, and the reality of a 7-million-unit housing overhang is likely to set in," the analysts said, according to Bloomberg News .Meanwhile, The Wall Street Journal reported on Wednesday that real-estate agents and analysts worry that when the shadow inventory is unleashed, it could cause a big bump in the road to recovery and add a new layer of difficulty for the housing market.Ivy Zelman, the chief executive of Zelman & Associates, a research firm based in Cleveland, believes 3 million to 4 million foreclosed homes will be put up for sale in the next few years. The question is whether the flow of these homes onto the market will resemble "a fire hose or a garden hose or a drip," she told the paper.
Michael, great post. It does make you wonder where is the transparency? If shadow inventory is a myth, what happened to the inventory? or is there some type of voodoo accounting?
Marcelo, very informative, sadly I had to miss 5 Star this year & James Lockhart's report.
It's hard to predict how much is out there. However to deny that there is not a shadow inventory, it is ludicrous. Fannie Mae and Freddie have 100,000 REO on the line. See the report from James B. Lockhart III, the former director of the Federal Housing Finance Authority at 5 Star. I think the reason they are delaying the release of assets and foreclosures is because of the PPIP (Private-Public Investment Partnership) guidelines that still have to come out.
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Marcelo, very informative, sadly I had to miss 5 Star this year & James Lockhart's report.