Distressed Inventory Report 8-12-10
The news this week is that distressed inventory appears to be peaking or else the lenders are on vacation and not processing the new defaults. We will know more by the end of September when they return from vacation. This is not a joke as the case loads are so high that work cycles are as important as market cycles. However looking at the big picture unemployment has stabilized so theoretically at some point in time the foreclosure cycle needs to stabilize but as has been discussed earlier there are two factors. The first is how long some owners can keep going on their reserves and what happens with the new wave of ARM resets that appear to be coming in 2011. Usually we have a quicker upturn and those folks living on reserves manage to hang on long enough so that as the economy comes out of the recession they begin earning enough again to cover their expenses. This may be the self employed or small business owners who are particularly sensitive to market cycles and also have had the added burden of their banks not providing interim funding and are forced to drain reserves to pay down debt. The other class is the unemployed who mange to find new jobs as the economy cycles back up. With an effective 1% growth rate the market is not helping these people out and they are slowly draining what resources they have.
Like a nuclear blast you can say the lucky ones were the ones who were incinerated in the initial blast. These would have been the sub prime borrowers who have been foreclosed in 2007 and 2008 and have written off their debt and are renting and building their resources. The unlucky ones are those who lived and are slowly dying from radiation poisoning and are struggling to hang on and hope they can last long enough until the effects of the blast are behind them. Â
Part of the good news regarding the dissipating the effects of the blast are that in the spreadsheet you will see the Notice of Trustee Sales is falling. The reason are potentially two fold. The first is that the house goes to foreclosure and is now a bank owned home. The other is that it has been sold in a short sale. Keep and eye for an increase of the bank owned homes as this will be an indicator if the market is absorbing the NTS homes through either a short sale or foreclosure.
The spreadsheet is here: Bellevue Foreclosure Report 8-14-10