Bank Shadow Inventory, Its Worse Than You Think | Bank Foreclosure Listings

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Real estate data provider Altos Research is not holding back with their recent report about housing…Titled aptly enoughThe US Housing Market – It’s worse than you think

The California-based company says that ominous shadow inventory of distressed properties hanging over the industry will lock home prices into a downward trajectory for the remainder of this year, with property valuestarting out 2011 even lower than they were in 2009.
Agents, realize that this pricing trend will push more homeowners underwater. More underwater homeowners will result in more agents needed to help those homeowners avoid a foreclosure. If a homeowner is on the path to foreclosure their best solution is a short sale.
Fact is the short sale process seems to be changing almost every week. Its not enough to merely have a ‘short sale designation’. Watch the FREE Harris Real Estate University ASD (Accredited Short Sale Designation) Agent Short Sale Secrets video and download the FREE short sale training book. Short sales are one of the top 3 ways to make money now in real estate.

Market trends charted by Altos show that inventory levels are indeed moving higher and the influx of shadow inventory is beginning to show in the market. The company’s VP of data analytics, Scott Sambucci, described a noticeable shift in housing supply in what he called “a sign of market weakness.”

The culprit behind the forecast is the weight of the shadow inventory of homes yet to hit the market. But, Sambucci said, anyone who generalizes the size and length of time it takes to clear the shadow inventory will be wrong.

“The recovery period is dependent on inventory,” Sambucci said. “But different markets move differently. It’s important to get local.”

Data provided by Altos as recently as January pointed to a steady decline in housing inventories over the previous 16 months, at both the national and local market levels. But Sambucci says that quickly changed after the first month of this year.

Since January, and particularly post-tax credit stimulus, Altos has tracked a rapid divergence in inventory numbers vs. listings sold and absorbed. This, Sambucci explained, means more inventory is coming onto the market, with less inventory leaving.

Translation: More Bank Foreclosure/ REO Listings….MORE BPO orders. Agents…do you need anymore proof that its not too late for you to become a REO listing agent? Take action now. Watch the FREE Harris Real Estate University RSD (REO Specialist Designation) Video and download the FREE Agent REO Secrets book.

As a result, he says, we’re going to see an extreme inventory overhang going into 2011. Add to that the fact that the pool of viable buyers out there is shrinking – thanks to tight credit, a declining homeownership rate, and more and more consumers being locked out of the market after a foreclosure – and you’ve got an equation that’s right in line with Altos’ bearish outlook.

Why there is a double dip…and what will happen with home values:

According to Altos Research, the 20-city composite price index, which measures home prices on a rolling 90-day scale, bottomed in 2009 because of the shadow inventory, whatever the estimate. It rose to a peak in July 2009 and fell to where it is now in July 2010 (see graph below). Sambucci said it should drop below the 2009 bottom and start at a new low in 2011 before rising back up to the same levels seen in 2010.

Screen shot 2010 07 30 at 3.34.41 PM 300x212 The US Housing Market   Its Worse Than You Think | Altos Research Report Released

Following the rudimentary rules of supply and demand, more inventory with fewer buyers equals lower prices.

Altos Research provided its assessment of the most stable housing markets…and the markets that it considers to be on shaky ground.

The San Francisco metro area topped the stable list, along with Las Vegas and Washington, D.C.

Unstable metros included Minneapolis, Denver, Chicago, and Phoenix.

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Re-Blogged 4 times:

Re-Blogged By Re-Blogged At
  1. Blatt + Cutino 08/04/2010 01:57 AM
  2. Virginia OnullConnor 08/22/2010 07:53 AM
  3. Mathew Yates 08/27/2010 01:14 PM
  4. Dave Brose 11/03/2010 02:24 AM
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Steve Davis
Davis Coastal Properties - Carlsbad, CA
Carlsbad CA

Your posts are always good reading and valuable information. Thank you for posting them and the time and effort to research and share the information with us. Steve

Aug 04, 2010 02:51 PM #16
Monica Hess
Feng Shui This Kentucky - Lexington, KY
Kentucky's Feng Shui Master

I used to think we could "think positive" and things would get better.  No more.  It's a sinking ship and those who don't know how to put on a life jacket will flounder.

Aug 06, 2010 01:04 AM #17
Scott Godzyk
Godzyk Real Estate Services - Manchester, NH
One of Manchester NH's Leading Agents

the only good thing is the level of shadow inventory is substantially different from state to state and region to region. Here in NH sales have increased, foreclosures seem to be slowing, the unemployment rate fell again last month leading us into further recovery. It is a shame to see foreclosures still increasing in other parts of the country. The key is jobs...

Aug 06, 2010 02:02 AM #18
Debbie Laity
Cedaredge Land Company - Cedaredge, CO
Your Real Estate Resource for Delta County, CO

I don't see the foreclosures slowing down in our area. I, too, have done more than the usual number of BPOs in the last month and a half. (Keep in mind, that not all BPOs are distressed properties. Sometimes these orders are done for home equity line increases and refinances.)

On the flip side I"m also seeing more buyer activity...maybe due to the number of foreclosures on the market. In process of writing this I also got a call from a friend of mine saying that she now has four properties under contract. So that's good news in light of the not so good news about the prices going down and more foreclosures coming on the market. Maybe we will see the lower prices countered by more buyer activity????

Aug 06, 2010 03:14 AM #19
Mike McCann - Nebraska Farm Land Broker
Mike McCann - Broker, Farmland Broker-Auctioneer Serving Rural Nebraska - Kearney, NE
Farm Land For Sale 308-627-3700 or 800-241-3940

I have had more requests for BPO's in small towns than I can remember...but I also have seen about average the number of repos in our area.  I think there will be a definite downturn in number of houses sold this next 8 months due to the hangover results of the stimulus money program ending. This may bump some possible traditional sales into foreclosure due to lack of buyers. I hope I am wrong.

Aug 06, 2010 03:46 AM #20
Marney Kirk
Cummings & Co. Realtors - Towson, MD
Towson, Maryland Real Estate

Tim & Julie, I get more & more calls and emails from those in distress. We also just had a report out that the Baltimore area prices are still struggling in comparison to the average of the rest of the US. Good details. Thank you!

Aug 06, 2010 04:41 AM #21
Lori Bowers
La Quinta, CA
The Lori Bowers Group

My area of La Quinta, California, is going pretty much as you are saying. I through in February 2010 we had a leveling off of prices. Now we are seeing more and more homes in the La Quinta, California area coming on the market as distressed sales. So far they are selling well. We are experts on distressed sales and particularly short sales at The Lori Bowers Group Paradise Properties.

Aug 06, 2010 04:56 AM #22
John Juarez
The Medford Real Estate Team - Fremont, CA

I met with a couple last night who have not made a mortgage payment since last December. I have another client who missed two payments last spring and cannot catch up now. Neither of these clients are now nor will be part of the shadow inventory because their houses will be sold as short sales. Short sales are here to stay for some years to come. The rise in short sales skews the whole concept of shadow inventory. I think the concept of shadow inventory has become much like the character who said "the sky is falling". The inventory is there. It is not a shadow. The lenders are simple managing the inventory. One of the methods they are using to manage it is to allow owners to stay longer without paying and sell as short sales instead of aggressively pursuing foreclosure.

Aug 06, 2010 05:50 AM #23
Tim and Julie Harris
Tim & Julie Harris® Real Estate Coaching - Las Vegas, NV

John...folks not making payments are technically part of the shadow inventory. Whne you hear the huge numbers...15,000,000 etc....included are the non preforming you descibe your sellers.


Aug 06, 2010 07:02 AM #24
George Bennett
Inactive - Port Orford, OR
Inactive Principal Broker, GRI

There will be a double dip in the housing market - see my blog at

The actions of Congress are lagging behind the desperation on Main St. and I believe that there will be a double dip in the current Great Recession.

Some areas will be spared but most areas will feel the contractions in the market and in the economy.

Aug 06, 2010 12:47 PM #25
Tom Priester
Paradise Sharks - Jupiter, FL
Paradise Sharks

No doubt that the luxury home market in my market areas are at the highest risk for price depreciation. Extremely high inventories, low level of demand and more foreclosures in these price ranges tell the story.

Aug 21, 2010 09:57 PM #26
Barb Fischer
Big Block Realty - La Mesa, CA
San Diego and La Mesa Real Estate

Love your posts! I get a ton of info-email but I always make a poit of reading yours. I think it's always about supply and demand, in any industry. Of course, lending institutions could help by actually making loans, thereby beefing up the industry

Aug 22, 2010 04:21 AM #27
Richard T. Dolbeare
KW Island Living - Lihue, HI
R(B), ABR, CRS...Hawaii Multi-Island Specialist

I love charts, thanks for sharing this.

Aloha & best wishes.

Aug 22, 2010 06:20 AM #28
Robert May
Robert W May - Lethbridge Real Estate - Lethbridge, AB
Real estate consulting

This is bad information but nothing that shocks me to see.  I believe that the worst is still yet to come and that things will be bad for a loooong time in the US real estate market.

Aug 22, 2010 08:02 AM #29
Sample Sample
Gila, NM

in some markets, there are years worth of bank owned inventory- the banks in Vegas and Phoenix are literally controlling the market

Aug 22, 2010 10:19 AM #30
Brian Schulman
Coldwell Banker Residential Brokerage, Lancaster PA - Lancaster, PA
Lancaster County PA RealEstate Expert 717-951-5552

Until the government reverses its anti-business-growth policies, there will be no true recovery of the jobs market, which in turn fuels the housing market.

Aug 27, 2010 01:04 AM #31
Susan Lehmkuhl
Buy and Sell Smart Realty, LLC - Phoenix, AZ
Associate Broker

Great dialogue.  It's definately regional and important to keep your local market in mind.  I am also starting to see more distressed homeowners in the active adult area before that had seemed to be more insolated.

Aug 27, 2010 03:18 AM #32
John Cunningham
eXp Realty - Phoenix, AZ
Helping Phoenix Sellers and Buyers find each other

I see a lopsided balance between foreclosure notices issued in Phoenix and number of foreclosures. We have seen this trend for over 2 years now. I wonder..........when will the inventory come out of the shadows?

Aug 27, 2010 04:22 AM #33
Christianne O'Malley
RE/MAX Realty Affiliates - Reno, NV
Exceptional Service - Delivering Results in Reno!

Northern Nevada has been brutalized by the economic downturn because our economy depending on tourism, services and the trades. Without people coming here with disposable income, the tourism suffered. When people have less cash they buy less services. When there is no construction, all the trades suffer. We are hopeful Nevada has hit it's low and now the remaining inventory just needs to trickle out. 

Aug 27, 2010 06:51 AM #34
Kate Bourland
Marketing with Kate - Redding, CA
Onlilne Marketing Mobile Marketing

Interesting to read all the comments.  It's almost as if society has been stratified into two completely different segments.  No matter how you slice it or dice it we will feel the effects of this for many years into the future.  

Aug 27, 2010 11:00 AM #35
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