Distressed Inventory Report 10-23-10

By George Thurtle

The amount of Distressed Inventory keeps declining. The Notice of Trustee sales are seeing some very large week to week reductions. The issue is if this decline is the result of underlying market fundamentals or is because the banks have stopped processing foreclosures. First of all not thay many banks stopped processing and most of them have started processing foreclosures again including Bank of America. Antidotally I am seeing a lot of short sales closing but not a lot of replacement inventory. Many short sale listings that were “aged” have either gone to foreclosure or many of them recently have been sold. In addition it appears that the economy has stabilized enough that the tail end of the distressd inventory from people hanging on is getting worked through the system.  Ten percent unemployment will keep new homes coming into the system but the wave of distressed inventory generated by the economy locking up in the fall of 2008 seems to be dissapating on the beach now.

The only area with any increase at all, and this was very mild, was West Bellevue. some areas such as East Bellevue are down almost 60% from their peak of total distressed inventory. Also if you look at the MLS inventory short sales are not balloning which would be the logical conclusion if the lenders stopped foreclosing. The short sale process does not require a foreclosure and the lender does not have to prove they have the rights to the note and deed of trust as in a foreclosure, all they have to do is release their interest.  If you are looking for distressed inventory there is less to select from and the window of opportunity may be closing if more buyers start entering the market next spring.  I know there is a theory that another foreclosure wave is coming with the major ARM resets happening in 2011 and 2012 but I am not seeing it here locally. In addition I am seeing banks respond and process short sales in a much more timely manner. Let’s see what the trends are in the next couple of weeks.

The spreadsheet is here: Bellevue Foreclosure Report 10-23-10

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