More on Shadow Inventory
Readers regularly send in articles for us to examine here – keep them coming!
Both articles used this chart from RealtyTrac:
At first glance it appears that there must be a wide-spread conspiracy between banks to withhold their foreclosed properties from the open market, in order save the world from total collapse. When you read the two articles linked above, that’s the impression the authors got from the chart.
1. Two years ago I paid to advertise on RealtyTrac, hoping to cause their members to utilize my services. As inquiries came in about properties marked as being in foreclosure on the RealtyTrac website, I noticed that there were many houses which had sold 6+ months prior, and others that had multiple entries.
When asked, a RealtyTrac employee confirmed that they receive their data from multiple sources, and they don’t screen it for accuracy. I quit advertising, and haven’t trusted their data since.
2. Readers gravitate to the sky-is-falling, tabloid-style soundbites. People think that there are conspiracies in play, and they want the dirt on them.
Yet authors, bloggers, etc. are struggling to get the truth on what’s really happening with foreclosures, and the real estate market in general. As a result, stories are written based on questionable data or theories/hunches hoping to appeal to the readers’ desires, but who knows how close they are?
3. San Diego is not on this chart, and I don’t know anything about the markets that are mentioned. But I did research on our bank-owned properties, based on the owners listed on the tax rolls for SFR and condo properties in San Diego County:
|SD REO Prop Owner||# of REOs|
We know that California is a tenant-friendly state with regards to eviction, so I’m going to cut the banks some slack during the first three months of REO ownership. Once they get the occupants out, it still takes time to assess the value, complete repairs, and general processing.
Let’s look at REOs owned since before May, 2010 that aren’t on the open market – if there are a bulk of those, then the conspiracy would be clearer.
A review of the individual properties owned by Bank of America revealed the following:
1. Nine of the 102 were owned in trust for an individual, not a foreclosure – leaving 93 REOs.
2. Twenty-five of the properties were former Barratt homes that BofA is in the process of selling.
3. That leaves only 68 individual BofA REOs in the county. Of those, only seven had been foreclosed prior to May, 2010, and how many of those were probably tenant-occupied? To me, it doesn’t look like BofA is trying to withhold properties.
How about Fannie Mae?
I checked the first 50 properties from the alphabetical list of Fannie REOs that were foreclosed on prior to May, 2010. Forty of the fifty had made it to the open market. Not as proficient as BofA, but they are probably less nimble about the evictions too.
It makes for a sexy story to say that the banks have this huge shadow inventory of homes waiting off-market, but until somebody besides RealtyTrac verifies it without a doubt, I’m going to be skeptical, at least with bank-owned properties in San Diego County.