From HW:
Although the drop in default rates shows promise, the amount of shadow inventory still creates a dark loom over the future of housing prices, according to latest results from Standard & Poor’s U.S. Residential Performance Index.
The shadow inventory of unresolved distressed properties is currently at an estimated $405 billion, representation four years of housing inventory and one-third of the outstanding U.S. non-agency residential mortgage debt.
The report states that full recovery will only occur once the supply of distressed properties shrinks to less than a quarter of the current volume.
Additionally, the monthly liquidation and cure rates are at about 2.5%. This stems to an overall resolution rate of 5%, where these rates have lingered in the past nine months. (See chart below)
The slowing first default rates seen on the chart allows borrowers to resolve loans and clear out the inventory instead of defaulting and adding more, S&P said in the report.
let me know if this is wrong.
$350 billion in outstanding default balance. At overall resolution rate of 5% per month, so each month we chow down another $17.5 billion. That means within 20 months, let’s just say 2 more years to take care of the whole thing?
That’s actually not that bad. Seriously!
Hey Jim,
If sometime this week (or whenever) you want to do a part two of your solar series, you can check out our system. Our’s is the one where water is pumped tot he roof and goes through “panels” to heat the water. It works amazingly well. The pool gets into the mid 80s (sometimes warmer)….and we only start the jacuzzi at 90….if you set the solar heat just to the jacuzzi. Which saves money.
I don’t know if it pencils, but my Dad loves it because he was sick of seeing the gas bill.
One time, SDGE came out to see if we had a leak because the gas usage for the pool & jacuzzi was so high. HAHA.
let me know! It’s a really cool system.
I think ocrenter is on to something, but in my preliminary analysis I keep thinking how manipulated the numbers could be.
The other thing I would like to see overlayed on this chart is the number of outstanding underwater mortgages not yet delinquent. Some portion of these are not yet “shadow inventory”, but are still future distressed dispositions.
I am seeing some instances where folks current on their mortgage can’t get the bank to respond on the mod front or they get denied under HAMP and they then reach the decision to simultaneously default and then short sale to just get the pain over with at a certain point. When they know they are subject to future resets, like in 10 year interest onlys, it is easier to rationalize, even though the resets are five or so years away. I think there is more of this kind of thing in the pipeline to come.
Kingside’s point is why I’m skeptical about the true value of the chart. as I calculated, to be able to be done and over with all of these shadow inventory in 2 years seem a little too good to be true.