Asset Value Appraisal and Consulting Rotating Header Image

Shadow Inventory

Pinellas County Home Foreclosure Filings Spike as Prices and Sales Level Off

Whether it was the anticipation of the foreclosure settlement or simply because lenders must eventually move their distressed inventory, initial foreclosure filings in Pinellas County rose sharply in December and January.  This follows the huge drop in filings after the disclosure of the robo-signing scandal in 2010.

Much has been made about the real estate shadow inventory and its effect on home prices.  As a real estate appraiser, my prior analysis showed a distinct link between the available inventory and home values.

With 717 initial real estate foreclosure filings in Pinellas County in January as compared to roughly 400 per month this past summer we could be seeing the beginning of an increased supply of foreclosed homes.  Of course with the Florida foreclosure timeline over 800 days what really matters to the inventory is the number of properties that have made it through the foreclosure process and made it onto the real estate market.  While there does not appear to be an increase in REO (real estate owned) properties recently listed, if lenders have become more aggressive foreclosing on properties, we would expect it to show up first in the number of initial filings.

The number of home sales continues to edge upward with a very slight increase over last January.  As the real estate market continues to work off the overhead of distressed homes, a more rapid resolution to the shadow inventory is necessary for a healthy housing market.  2012 maybe the year that the housing market takes a big step toward normalcy and could provide the last best opportunity to snap up properties at historic bargains.

As the premier provider of real estate appraisals and property valuations in the Tampa Bay area, Marsh Bilby and Asset Value Appraisal and Consulting assists banks, mortgage companies, Attorneys, Realtors, loss mitigators and home owners with a complete line of real estate appraisal and valuation products.

Market Bottom or Beginning of Final Leg Down

In my last newsletter I discussed the sharp drop in available housing inventory and how it has been leading to an increase in the average sale price of residential properties.  The chart below is of Pinellas County and reiterates this fact.  Year over year the total number of sales has increased 16% while the current inventory of homes has decreased almost 42%. The result has been a modest increase in prices of 3.5%.  As depicted in the chart below, the pace of declining inventory and increasing sale price has accelerated in the last six months.  Since the low in February 2011 the average sale price in Pinellas County has increased 22%.  Is this the sign that the housing market has recovered or is there something else at play?

August 2011 Average Sale Price and Current Inventory

It is pretty obvious that the decline in inventory has led directly to this increase, but what about the “Shadow Inventory” we hear so much about?  (more…)

Market Conditions

Far and away the Number #1 question I am asked is, “Marsh where is the housing market headed?” or some variation thereof.  While I am have always freely given my advice when asked, often contradicting the conventional wisdom (see housing bubble and burst), I have been encouraged to more widely disseminate my views.  Contrary to the typical prognosticators in the industry, I perform valuations and market analysis daily.  I have my ear to the ground and can recognize pivot points before they are revealed in the national press.  Perhaps more important is that my analysis is focused on the Tampa Bay market only.  I do not pretend to know what is going on in Las Vegas, I know what is going on here.

What has been most striking over the last several months is the sharp decline in housing inventory and months of supply.  It is very clear that home sales are far out pacing new supply which is driving the average price of a home up sharply.  (more…)

Shadow Inventory?

Shadow Inventory Gets More Shadowy

Tim Cavanaugh | April 26, 2010

If you’ve been trying to keep track of the “shadow inventory” of homes that are destined to be foreclosed and come onto the market within the next few years, you’ll be glad to know that the hard-to-determine statistic has been narrowed down: It’s either 1.7 million houses or 12 million houses.

That’s the skinny from a site called CapitalGainsAndGames.com, which cites some comments made last week by Amherst Securities analyst Laurie Goodman:

Laurie Goodman told the National Economists Club today in D.C. 7.2 million are already in the delinquency pipeline, and 250,000 are going delinquent each month bringing the total to 12 million. “Once you’re 60 days delinquent, a foreclosure is highly probable,” she said. Goodman is a Senior Managing Director of Amherst Securities and is widely recognized as the best housing finance economist on Wall Street. (more…)

Real Estate News

Laurie Goodman, from Amherst Securities presented her latest findings at the American Enterprise Institute and it is a gloomy forecast.  She describes, “10.81 million homes are at risk of default over the next 6 years. Even if we try to be extremely conservative we can’t get the number below 8.7 million units.”

With defaults already piling up, the shadow inventory of homes has been growing rapidly, and given this new data the number is going to skyrocket. As this chart shows, the total has gone up from 2 million homes in 2009 to 3.35 million as of April, a 67.5% increase already.

The Atlantic explains this shadow inventory chart: “What’s happening to the homes of all those defaulted borrowers that we hear about? Many of those properties are a part of so-called shadow inventory. This is the sort of limbo between when a home’s loan defaults and when the property is put on the market for purchase. The increase shown above is staggering. The shaded area shows mortgages more than 12 months delinquent or in foreclosure (darker blue) and those seized by the bank (lighter blue).” (more…)