Shadow Housing Inventory: Two Houses for Every One for Sale: "
RealtyTrac, as reported on Housing Wire, gave a gloomy update on the US housing market. RealtyTrac does granular collection of data on foreclosures, capturing every filing. One of the shortcomings of this approach is that processes vary by state (as in some state require more court filings over the course of a foreclosure than others). In addition, homes can go in and out of foreclosure (an owner gets the first notice, contacts the servicer and works out a catch-up plan, and later falls behind again). So the commentary of RealtyTrac and other market participants is essential in interpreting the data.
The key takeaway:
James Saccacio, CEO of RealtyTrac, said at the current pace, more than 3m properties will receive a foreclosure filing by the end of the year, and lenders will repossess more than 1m of them. According to a report from the Toronto-based Capital Economics, the weight of the shadow inventory may contribute to a double dip in the housing market. The report found that for every home currently on the market, two homes are waiting to be sold.
‘The roller coaster pattern of foreclosure activity over the past 12 months demonstrates that while the foreclosure problem is being managed on the surface, a massive number of distressed properties and underwater loans continues to sit just below the surface, threatening the fragile stability of the housing market,’ Saccacio said.
Yves here. The scary part here is this estimate of market overhang refers only to foreclosed and distressed property. There is another category of hidden inventory, people who would like to sell but aren’t even listing their houses. These would include people who want to relocate, aging individuals who’d like to downsize and had hoped to be able to liberate some equity.
More detail from HousingWire:
"Foreclosure filings decreased 3% in June after another 3% drop in April. It’s the third straight month of declines. Foreclosure filings were down 7% from June 2009. Despite the recent downward swing, June marked the 16th straight month of more than 300,000 filings.
For the second quarter of 2010, foreclosures dropped 4% from Q110 and remained 1% above Q209. As default and auction notices fell, REOs increased 5% from the last quarter and 38% from Q209. It’s the most REOs measured in a quarter since RealtyTrac began publishing the reports in January 2005.
‘The second quarter was a tale of two trends,’ Saccacio said. ‘The pace of properties entering foreclosure slowed as lenders pre-empted or delayed foreclosure proceedings on delinquent properties with more aggressive short sale and loan modification initiatives. Meanwhile the pace of properties completing the foreclosure process through bank repossession quickened as lenders cleared out a backlog of distressed inventory delayed by foreclosure prevention efforts in 2009.’
(Via naked capitalism.)
