The first article was published by Core Logic and outlined the status of the infamous REO Shadow Inventory. For those of you who haven't heard of this term before. The REO Shadow Inventory is what most consider to be this pipeline of REO Assets that banks are keeping off the market waiting for some magical moment to release them and sell them off into the market. In reality, the real Shadow Inventory is an estimate of three items. 1. REO Inventory owned by banks that they either are waiting to put on the market or that are on the market and have not sold yet. The average time to close an REO Asset from the time it goes to foreclosure until the time it gets sold is about a year. This is the smallest portion of the Shadow Inventory and, in reality, its not really a shadow. It is real REO Inventory. 2. Pending REO Inventory. This number is also a projection and includes all the loans where an NOD has been filed, but the bank has not yet foreclosed and taken possession. It is the second largest portion of the REO Shadow Inventory. 3. The last and largest portion of the Shadow Inventory is the loans that are seriously delinquent but where the bank has yet to file a Notice of Default.
So, this article by Core Logic simply outlines that the Shadow Inventory remained stable at 1.6 million units in October 2011 from the month prior. However, it is down from 1.9 million units in October of 2010. In addition, it outlines that Florida and California account for a third of all this inventory. So, this will continue to cause downward pressure of values in spite of all the other positive factors we have in the market. See their chart below.
[caption id="attachment_20" align="alignnone" width="400" caption="Shadow Inventory as estimated by Core Logic"]
[/caption]A second and related article also came out recently in DS News which reported that a poll by Housing Predictor said that "47% of those surveyed would intentionally stop making their mortgage payments even if they could afford to in order to get out from under the sinking investment of home-sweet-home." This is a startling high number but also represents at least one reason why the REO Shadow Inventory is as high as it is. Much of the category #3 outlined above is homeowners who think they have to be late to get a modification or a Short Sale and many of these will never become REO Assets. But it still impacts the market because the perception is that these people will push down values. Most homeowners believe that you have to be delinquent to get a loan modification and that you have to be delinquent in order to get a Short Sale approved. None of those can be further from the truth. There is a way to sell your home in this market with dignity and not completely ruin your credit.
If you are thinking that a Camarillo Short Sale or a Short Sale anywhere in Ventura County or Los Angeles County is the right thing for you, please call me first to discuss the overall strategy for making the right decision for you in this volatile time in the real estate business.
