Here’s one more 16-page report on shadow inventory, with many charts and graphs:

An excerpt:

The single largest impediment to a recovery in the housing market is the large number of loans that are either in delinquent status or in foreclosure that are destined to liquidate.

This creates a huge shadow inventory.  We estimate this housing overhang at 7 million units, or 135% of a full year of existing home sales.

We look at the impact on a number of local markets, then look to the causes of the overhang:

1. Transition rates are high,

2. Cure rates are low, and

3. Loans (foreclosures) are taking longer to liquidate.

We are concerned that, in light of this housing overhang, the stabilization we have seen in home prices the last few months is temporary.

They’ve identified the big picture, and used Riverside as a test case.  Let’s take our own look at Carmel Valley, 92130, which is a pertinent test for a couple of reasons; 1) it’s housing stock is mostly newer tract houses, and a more-homogenous sample should run truer, and 2) it has been one of the best performers so far.  You can probably guess that your favorite surrounding areas may be faring somewhat worse.

Current MLS detached and attached active listings: 242’s NODs, NOTs, and REOs list: 192

Duplicates: 58

Total Inventory 242 + 192 – 58 = 376

Month’s Worth of Inventory: 376/77 = 4.88 months – if we can assume low or no seasonality into September’s 77 closings.  This report makes a big deal about seasonality, but I think in Carmel Valley there will be less seasonal effect this year due to lower pricing.  Last year in 92130 the number of monthly sales for September through January were 46, 50, 31, 32, 32.

Of the 134 defaulted properties that aren’t on the MLS:

There are 10 bank-owned properties and 55 others on the auction list that aren’t on the MLS.  Let’s assume that ALL 65 of those will make it to market at some point over the next six months. (65)

Many of the unlisted 69 NODs are homeowners who have applied for a loan modification.  How do I know this?  I’ve knocked on their door, and close to 100% of the owners say it.  But let’s assume that half will either get an acceptable loan modification, or go back to their original payments, rather than get foreclosed.  Let’s be conservative and add 40 more of the NODs to the ‘future foreclosure’ roll. (40)

But let’s also include about 30 of the 58 that are trying to sell who will fail, and get foreclosed anyway. (30)

60 + 40 + 30 = 135 more houses and condos are ‘shadow inventory’, properties that aren’t on the open market currently, but should be in the next six months.

You can decide for yourself what the impact will be on 92130 with an extra 10-20 homes per month coming on the market.  I think there are enough buyers waiting that they will all sell, it’s just a matter for how much.  There are only 20 of the 198 detached active MLS listings that are under the magical $300/sf number on their list prices – you can bet the REOs will be right around there.

True, those who are delinquent but haven’t received an NOD yet are not in the count, but did they just got a later start than these folks?  Most importantly, are the defaulters growing faster today than earlier in the year?  If so, tack on more pain to your own opinion.

Here is the list – if you see one you’d like to pursue, contact me:


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Jim the Realtor
Jim is a long-time local realtor who comments daily here on his blog, which began in September, 2005. Stick around!

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