Quote Originally Posted by Novaheart View Post
I don't know that anyone is suggesting that the practice is nefarious. Lenders are waiting long periods of time between default and foreclosure. In some cases they appear to think it's advantageous to have an owner occupant living in the house and maintaining it rather than another deteriorating property with a For Sale sign out front. My mother's neighbor hasn't made a mortgage payment in three years, and she's not using a cracker jack lawyer to fight foreclosure, the lender simply doesn't seem interested in taking the house at this time. Another neighbor cuts the grass so the neighborhood won't suffer.

There are a wide range of estimates of shadow inventory. A common measure are loans that are either in the foreclosure process or that are three months or more delinquent. These are mortgages that are among the most likely to ultimately become bank-owned properties.

Barclays Capital estimates that at the end of May there were around 1.8 million mortgages in the foreclosure process and another 1.45 million where borrowers have missed at least three payments. That puts the total number of properties that could be repossessed and resold by banks at around 3.25 million mortgages.

If those homes hit the market all at once, housing would be in deep trouble. Last year, for example, there were 4.4 million sales of previously owned homes. The figure is still higher than any time before June 2009.

But it is down from a peak of 4.25 million in February 2010. And unless mortgage delinquencies begin to accelerate sharply, the shadow inventory won’t be growing. Barclays estimates that at the current rate, this figure could fall to around 2.4 million loans.

Perhaps you have been listening to this guy:

“The concept of a huge shadow inventory is preposterous,” says Christopher Thornberg, a housing economist with Beacon Economics in Los Angeles. “The number of mortgages in distress is way down from one year ago. It’s clear there are fewer distressed properties out there.”

Housing analyst Ivy Zelman has a slightly larger estimate of shadow inventory—around 6.3 million homes at the end of last year—that includes more newly delinquent mortgages and potential re-defaults. She says that in a normal market, there’s a comparable shadow inventory of 2.9 million homes. So the key figure—the excess level above the historical trend—is around 3.4 million homes.


Trust Forbes?

What Housing Recovery? Distressed Sales Still High, Shadow Inventory Massive


Housing markets seemed to have turned a corner, with Tuesday’s Case-Shiller data adding to the optimism. Home prices have risen for a second consecutive month for the first time since the summer of 2010, but much of this is a consequence of the falling percentage of distressed sales, while prices are still more than 31% of their peaks and may take years to recover. With 11.4 million, or 23.7%, of all residential properties with a mortgage under water, and a shadow inventory worth $246 billion, according to CoreLogic, a true housing recovery is far away.

As mentioned previously, the most recent data on underwater mortgages shows that nearly a fourth of all residential properties with a mortgage are underwater. That’s 11.4 million as of the end of the first quarter. At the same time, financial institutions including big banks with exposure to the mortgage business like Bank of America, JPMorgan Chase, and Citigroup are sitting on a shadow inventory of 1.5 million units, or four months supply. Worth $246 billion, the shadow inventory will certainly weigh on lending and economic conditions going forward.

I'm of the opinion a lot of these so called Real Estate market experts are using half truths , improper comparisons and faulty analysis in making their arguments. Now historical data analysis is a valuable tool in determining mkt appreciation, contraction or stagnation except in current conditions. Looking to recent histories "Peak" market conditions to form critique and draw comparisons is Inane in that recent "peak" conditions are now known to have been extremely inflated due to a handful of reasons , governmental dictate & interference chief among them and contributed greatly to the collapse.. Sometimes one has to step outside the Academic bleating of the so called experts who have never spent a day actively involved in the market they are talking about. Is new construction picking up , are sales of existing properties increasing ? yes on both accounts, anemically but still coming back. Now given recent history do you not suppose contractors would approach speculation with a considerable dose of skepticism , They must be seeing something the super Geniuses aren't. The rebound will continue at a snails pace as long as the overall economy is on the skids. Once the economy picks up you will see the housing market gather momentum and rebound further . Naturally the return to having to only approve mortgages for those deemed credit worthy of , financially capable of and Intending to pay off a mortgage will slow a recovery to a certain extent.

If you aren't attempting to sell your home it doesn't matter if the mortgage is 1000% of current market value. In an appreciating mkt a 4 month supply of inventory aint squat unless of course they are overpriced , in need of considerable repair/upkeep or both.