{"id":1235,"date":"2012-08-14T19:46:19","date_gmt":"2012-08-14T19:46:19","guid":{"rendered":"http:\/\/juliekrealestateblog.com\/?p=1235"},"modified":"2012-08-14T19:46:19","modified_gmt":"2012-08-14T19:46:19","slug":"shadow-inventory-its-not-as-scary-as-it-looks","status":"publish","type":"post","link":"https:\/\/jurus.net\/juliemeggat\/shadow-inventory-its-not-as-scary-as-it-looks\/","title":{"rendered":"Shadow Inventory: It\u2019s Not as Scary as It Looks"},"content":{"rendered":"

The housing market is improving because there are more buyers chasing fewer homes. Skeptics of a housing bottom<\/a>, however, often point to a scary set of numbers: the \u201cshadow inventory\u201d of potential foreclosures\u2014the millions of mortgages that are either in foreclosure<\/a> or in seriously default.<\/p>\n

It\u2019s true that home prices<\/a> are unlikely to see brisk gains once they do hit bottom because it will take years to absorb this glut. But will this phantom inventory derail the incipient housing bottom?\u00a0 Maybe not, say a number of housing analysts.<\/p>\n

There are several reasons why the shadow inventory isn\u2019t as scary as it sounds: It\u2019s concentrated in a handful of markets\u2014it isn\u2019t inherently a national phenomenon. It is being offset by improved demand, particularly from investors. And the housing vacancy rate is low, a product of very little new home construction over the past few years that could counterbalance continued high inventories of foreclosed homes.<\/p>\n

We\u2019ll address each of those in subsequent posts. But first, let\u2019s examine the actual size of the shadow inventory. While the shadow is very large, one often-overlooked fact is that the shadow isn\u2019t nearly as large as it was two years ago.<\/p>\n

There are a wide range of estimates<\/a> of shadow inventory. A common measure are loans that are either in the foreclosure process or that are three months or more delinquent. These are mortgages that are among the most likely to ultimately become bank-owned properties.<\/p>\n

Barclays Capital estimates that at the end of May there were around 1.8 million mortgages in the foreclosure process and another 1.45 million where borrowers have missed at least three payments. That puts the total number of properties that could be repossessed and resold by banks at around 3.25 million mortgages.<\/p>\n

\n
\"\"<\/dt>\n
\u00a0<\/dd>\n<\/dl>\n

\u2018The concept of a huge shadow inventory is preposterous,\u2019 says one economist.<\/p>\n

If those homes hit the market all at once, housing would be in deep trouble. Last year, for example, there were 4.4 million sales of previously owned homes. The figure is still higher than any time before June 2009.<\/p>\n

But it is down from a peak of 4.25 million in February 2010. And unless mortgage delinquencies begin to accelerate sharply, the shadow inventory won\u2019t be growing. Barclays estimates that at the current rate, this figure could fall to around 2.4 million loans.<\/p>\n

\u201cThe concept of a huge shadow inventory is preposterous,\u201d says Christopher Thornberg, a housing economist with Beacon Economics in Los Angeles. \u201cThe number of mortgages in distress is way down from one year ago. It\u2019s clear there are fewer distressed properties out there.\u201d<\/p>\n

Housing analyst Ivy Zelman has a slightly larger estimate of shadow inventory\u2014around 6.3 million homes at the end of last year\u2014that includes more newly delinquent mortgages and potential re-defaults. She says that in a normal market, there\u2019s a comparable shadow inventory of 2.9 million homes. So the key figure\u2014the excess level above the historical trend\u2014is around 3.4 million homes.<\/p>\n

Ms. Zelman published an in-depth research note earlier with the title: \u201cShining a bright light on the shadow: Why what\u2019s lurking doesn\u2019t concern us.\u201d In it, she explains how it\u2019s more important to focus on the pace at which foreclosures are being liquidated, and not the absolute number.<\/p>\n

\u201cJust like the Wizard of Oz, shadow inventory is not very intimidating once you pull back the curtain,\u201d the report said. That isn\u2019t to dismiss the magnitude of the problem and headwind it will continue to pose for any housing recovery, she wrote. \u201cThe bathtub is almost full, but the water has stopped rising, and we are most concerned with how fast it drains.\u201d<\/p>\n

Certainly, there are many other\u00a0 risks to housing. There are at least 11 million homeowners that are underwater, owing more than their homes are worth. There are even more than that who don\u2019t have enough equity to make a 10% down payment on their next home, plus pay a real-estate broker\u2019s sales commission, in order to trade up to a bigger home or downsize to a smaller one.\u00a0 And it\u2019s still very difficult to get a mortgage.<\/p>\n

But the shadow inventory is often the big trump card used to quiet any housing-happy talk. Tomorrow, we\u2019ll offer a deeper look at how demand factors into this equation, and how the shadow is being disposed.<\/p>\n

 <\/p>\n

Source: LA TIMES<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The housing market is improving because there are more buyers chasing fewer homes. Skeptics of a housing bottom, however, often point to a scary set of numbers: the \u201cshadow inventory\u201d of potential foreclosures\u2014the millions of mortgages that are either in foreclosure or in seriously default. It\u2019s true that home prices are unlikely to see brisk […]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_links_to":"","_links_to_target":""},"categories":[2],"tags":[1113,192],"class_list":["post-1235","post","type-post","status-publish","format-standard","hentry","category-real-estate-news-tips","tag-hollywood-hills-real-estate","tag-west-hollywood-real-estate"],"_links":{"self":[{"href":"https:\/\/jurus.net\/juliemeggat\/wp-json\/wp\/v2\/posts\/1235","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jurus.net\/juliemeggat\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jurus.net\/juliemeggat\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jurus.net\/juliemeggat\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/jurus.net\/juliemeggat\/wp-json\/wp\/v2\/comments?post=1235"}],"version-history":[{"count":0,"href":"https:\/\/jurus.net\/juliemeggat\/wp-json\/wp\/v2\/posts\/1235\/revisions"}],"wp:attachment":[{"href":"https:\/\/jurus.net\/juliemeggat\/wp-json\/wp\/v2\/media?parent=1235"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jurus.net\/juliemeggat\/wp-json\/wp\/v2\/categories?post=1235"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jurus.net\/juliemeggat\/wp-json\/wp\/v2\/tags?post=1235"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}