Distressed Inventory Report 2-13-10
Well this shows what happens when you try to make a prediction. I thought that the distressed inventory would be spiking by now but it hasn’t. This week the distressed inventory held steady and the listed inventory is falling. Now this will be replaced but a couple of things are happening.
The first is that it appears some of the inventory is getting sold before the lender takes title. This is happening for two reasons. The first is because some of the lenders are finally wising up and setting the minimum bids at the foreclosure auctions closer to market prices rather than the loan amount. As a result more homes are getting picked up at the foreclosure auctions and not making it into the system. This trend is being accelerated because FHA has now rid itself of its 90 day holding rule before resale. This has allowed speculators back into the market. These speculators were sorely needed since they picked up the worst houses that needed repairs and are refurbishing the inventory so young families can move in and occupy them. This will revive neighborhoods and greatly help the economy by redeploying some of the construction labor that has been on the sidelines. There was some political antithesis to allowing speculators to make money but the folks at FHA finally had to get practical or see its insurance fund go broke. The speculators that are in the market now have been prudent speculators because they have money and in many cases don’t even use loans. We need their money to improve these homes and get them back on the market in saleable condition something no lender can do. We also need this money flowing in the economy refurbishing neighborhoods rather than sitting on the side lines. The second reason we are seeing a flattening of distressed inventory is that lenders are finally getting more receptive to short sales and are starting to be more responsive. It is still is not what it should be but it is getting better. You can see this in the turn over of the NTS inventory.
So here is the bottom line. I am seeing more buyers enter the market as they feel more comfortable about their own personal situations and less DESIRABLE inventory. These are newer homes in good condition. No matter how you cut it this inventory will continue to decline if the economy remains stable. I know there are still the “Shadow Inventory” housing bears still out there. Their big battle cry now is the Option ARM resets in the next two years. These loan defaults will continue to supply inventory for the next couple of years but if the lenders keep improving their game and dealing with this problem and the economy stays stable this inventory will be worked through the next couple of years. Antidotally I am seeing the lenders more responsive in dealing with these types of loans on a short sale basis.
Here is the link to the spreadsheet: Bellevue Foreclosure Report 2-13-10