http://www.realestateappraisertips.com/ - Home Appraisers: Analysts Say: New Housing Crash Looms as Shadow Inventory Climbs past 7 Million. Commentary is presented below the snippet.
Default Servicing News.com is reporting a very, very serious problem with “Shadow Inventory“.
This image below was published in April 2009 pertaining to the San Francisco Bay Area only and isn’t related to the DSNews.com article. This graph below is used to illustrate what “shadow inventory” looks and how it impacts a market!
Here’s a snippet from the article:
“The housing crash is about to come back with a vengeance, as 7 million new foreclosure properties are about to hit the market, analysts at Amherst Securities Group LP said this week.
Market observers say that loan modifications, legal wrangling, redefaults, and bank practices have delayed foreclosures, and that an undisclosed glut of homes is about to come to light.
The New York-based mortgage-bond analysts called that number – which is about five-and-a-half times larger than 2005’s national tally of delinquencies and foreclosures – a “huge shadow inventory” that threatens to further destabilize a housing market that had shown signs of righting itself over the summer.
Despite some recent optimism, many market observers now agree on several factors that are expanding the nation’s shadow inventory. Loan modifications, legal wrangling, redefaults and bank practices have delayed foreclosures while actually worsening many homeowners’ positions.
As a result, the analysts say a so-far undisclosed glut of homes is about to come to light, and it’s likely to further depress values and sales.
“There’s going to be a flood [of bank-owned homes] listed for sale at some point,” John Burns, a real-estate consultant based in Irvine, California, told the Wall Street Journal this week. He expects prices to decline another 6 percent this year. The analysts at Amherst predicted an 8 percent drop, while a Sept. 11 report by Barclays forecasted a further 13 percent drop, saying the worst of the crash is “decidedly underway,” with increased foreclosures sapping “the strength of the recovery in all but the most optimistic of scenarios.”
One cause of the problem, the Journal says, is unintended fallout from “well-meaning efforts to keep families in their homes.” Foreclosures have been stalled by state moratoriums, as well as by lenders and servicers who are using the time to determine if troubled borrowers are eligible for loan modifications.
“We are going to see a spike from now to the end of the year in foreclosures as we take people out of the running” for modifications or other alternatives to foreclosing, a Bank of America Corp. spokeswoman told the Journal, adding that government pressure to stem foreclosures had reduced their foreclosure sales to “abnormally low” levels.”
Here’s a few questions to ponder below. There seems to be more optimism going into 2010 with a big dose of reality that the housing market rebound may not exactly be as long lived as has been hoped for. The article points out that loan modifications aren’t working. Also, in 2009, approx. 46% of home sales were for first time home buyers using the tax credit, adding billions to the national deficit. With a $9+ Trillion national deficit and growing, how can expect the dollar to maintain strength? How can expect long term mortgage rates to remain so artifically low?
1.) How should home appraisers view this situation? How should they prepare?
2.) If you’re located in a market where the REO rate has been relatively low and market stable, will your market really be affected? Will your market experience rising numbers of REOs and market uncertainty as 2010 progresses? To some degree, my local stable market with a low REO rate is experiencing higher and higher numbers of foreclosures.
3.) I recently read where Florida home sales were 61% better in 2009 than in 2008, signaling somewhat of a recovery and a lessening of REO inventory. I also read today where banks were going to stop dumping premium reo condo inventories because when the market comes back, they will be rewarded. And, with the billions of dollars in our tax payer funded TARP money, they can afford to do so. Will this situation with new shadow inventory dampen these situations in hard-hit markets such as Florida, California, Georgia and Nevada?
Food For Thought! Bill Cobb
Tags: appraisal organizations, home appraiser tips, real estate appraisal, real estate appraiser, real estate appraiser survival, real estate appraiser tips, real estate appraisers, shadow inventory
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