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REO’s Until 2020? Shadow Inventory in the Millions? Frozen Families on the 4th of July?

Sonoma County, California–In his weekly “Mortgage Credit News”, Lou Barnes poses three questions that SHOULD have been asked of President Obama in last week’s press conference:

“The newest housing data has showed signs of bottom in price, delinquency, and sales volume. However, three questions apparently too impertinent to pose at the press conferences of either the Fed Chairman or the President:

  1. How much distressed housing inventory has accumulated?
  2. How fast are distressed homes selling versus new ones arriving?
  3. If… if they are selling faster than piling up, but at a rate that will not clear for a decade or two, what are we going to do about it? “

CoreLogic reports that shadow distressed inventory not listed fell in April from 1.9 million homes to 1.7, down from the 2.2 million peak in early 2010. Distress is defined as 90+days delinquent, in the foreclosure process, or foreclosed REO.

Meanwhile, LPS says the total distress count, listed and not, is 2 million 90+, and another 2.2 million in foreclosure, plus analysts’ guess at REO ranging 500,000 to 800,000. Conservative totus porcus*( Completely; unreservedly: swallowed the official version totus porcus. (slang) Fake Latin meaning whole hog).  4.8 million. However, LPS says that an astounding 70% of loans in foreclosure process have been there for more than a year, and almost that many 90+ are not yet in foreclosure. If that portion is frozen, the remainder of the distressed inventory is flying on and off the shelf at improbable warp speed.

The National Association of Realtors estimates (hah-hah) annual sales of existing homes at about 4.5 million, and total listed inventory (all kinds) at about 4 million. Given LPS’ 4.8 million total distressed, minus CoreLogic’s 1.7 million distressed-not-listed, that would leave 3.1 million distressed listed, 77% of all listings.

Nonsense. There must be a hell of a lot of distressed inventory not anywhere near a market. And in expanded distress definition, CoreLogic’s underwaters, just those at least 50% OR $150,000 underwater, are another 2 million homes. Some pig. “


Lou goes on to point out the numbers are more realistically pegged at around 300,000 properties being “cleared” from the REO ranks annually. According to the numbers above that means we will have this market around us until 2020! NOW–REMEMBER my cavaet–ALL REAL ESTATE IS LOCAL! We will explore our local market next week as the June numbers come in after the Holiday. I suspect many closings happening in early July to be reported as June Sales.

  However, the big news is the “Frozen” inventory of families who WANT to move, get bigger houses, smaller houses, downsizing, baby-boomers ready to retire but ALL “Frozen” into their existing homes because they are UNDERWATER and owe MUCH more than the homes current value. WHAT do we do with these folks? Do they just try and short-sale when they move? Remember, lender are beginning to do Short-Sales even if you are NOT LATE on your payments. If you can effect a Short-Sale this way we can actually GET you a new loan!

  If you have questions of your Home’s Value–give Allison a call or go to our “Market Snapshot” which is on the home page of this Blog! Enter your data and it will show you all the comparable sales and actives on the market!



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