Naples/Collier County Foreclosures

The number of Lis Pendens (the formal notice that starts the foreclosure process) has steadily been declining in the Collier County and Naples area.

In October 2008 was the peak of filings with a total of 946 filings.

The graph shows the number of filings occurring on a monthly basis according to the Collier County Clerk of Courts office. The trend line shows the right leg of a normal bell curve which represents a downward trend in the number of foreclosure actions being filed.

In addition the graph shows the number of certificates of title issued by the county clerk’s office. More properties are continuing to be auctioned at the county courthouse and ownership changing by recording a certificate of title.

The question arises – Is the number of foreclosure actions really declining or is it a temporary decline? Some pundits have stated we can expect to see another flood of foreclosures hit the market. They are impart basing their thoughts on the fact in 2010, 3/1, 5/1, and 7/1 adjustable rate mortgages (ARM’s) will be resetting. 2010 is the only calendar year in which 3 different ARM’s are scheduled to reset. Through May 2010, the influx has not occurred. However, the number of property auctions taking place at the courthouse has not shown the downward trend at this time.

There are often discussions about a “shadow inventory”. What is a shadow inventory in real estate?

Definition 1 – Foreclosed but not listed.

Definition 2 – Homes in the foreclosure process as well as delinquent mortgages where foreclosure proceedings are imminent.

Definition 3 – All homes delinquent, short sales not on the market, REOs not on the market, and anything in the foreclosure process.

Definition 4 – All of the above plus modified loans (as they have a large percentage of failing anyway, pay option-arms about to be reset, and lots sitting idle with builders in trouble.

Based upon the graph it does appear a shadow inventory exists. The unanswered question is how large is this inventory? Unknown factors are how many modified loans have been successful, how many short sales have been successful, how many properties are being purchased at auction by individuals rather than the lenders, etc.?

The final observation is – how does this affect the months of inventory?