Standard and Poor's, Amherst Securities, The Royal Bank of Scotland, and First American CoreLogic all agree shadow inventory is a major problem for the US housing market.
Today, we also have a Grade D HELOC abuser hoping to sell while they still have equity.
Irvine Home Address … 25 BIRDSONG Irvine, CA 92604
Resale Home Price …… $649,900
I wish that I could fly
Into the sky
So very high
Just like a dragonfly
I'd fly above the trees
Over the seas in all degrees
To anywhere I please
Oh I want to get away
I want to fly away
Yeah yeah yeah
Lenny Kravitz — Fly Away
This song resonates with the freedom HELOC abusers feel when the free money flows. Go anywhere. Do anything. Fly away. Enjoy life's bounty. It reflects an abundance in life built on illusion; a neverending story rudely interrupted by reality. We see broken dreams and The Unceremonious Fall from Entitlement.
I wrote Shadow Inventory Orange County and Shadow Inventory Revisited to help define the terms and bring greater awareness to this major obstacle to a market recovery. HousingWire.com brings us reports from Standard and Poor's, Amherst Securities, The Royal Bank of Scotland, and First American CoreLogic delivering the same message: Shadow inventory is coming, and it must work through the system.
A report from Jon Prior at HousingWire.com:
The “shadow inventory” of bank-repossessed properties, as well as distressed mortgages facing foreclosure, will take nearly three years to clear at the current sales rate, according to a report from the credit rating agency Standard & Poor’s (S&P). The analysts add that during this period many servicers will likely shift their emphasis from mortgage modification to loan liquidation.
The “shadow inventory” of homes includes all delinquent loans and real-estate owned (REO) property that has not reached the market. REO property are foreclosed homes taken back by the bank for liquidation. As for the total amount of homes in the shadow inventory, Amherst Securities places the total at 7m. The Royal Bank of Scotland found 2.7m, and First American CoreLogic counted 1.7m.
S&P estimates the inventory to equal a 33-month supply of homes. Analysts added the estimate is actually conservative, as they did not assume homes not showing signs of distress would default and push the overhang of supply even further.
Furthermore, court delays, political pressure and servicing backlogs constricted the flow of foreclosures hitting the market to a trickle. These delinquent borrowers who have not received a foreclosure fuel the “rapidly” growing shadow inventory of properties, according to the report.
“Overall, it is our opinion that recent positive housing reports should not be construed as a sign that the distress in the residential housing market is abating, but rather should be attributed to the temporarily limited supply of homes on the market,” according to the report.
Our current pricing is only sustained by lack of inventory and very low sales volumes. Any increase in inventory and resulting sales volumes will force prices lower, so homeowners and lenders live in fear of what will happen next. I speculate the loose cartel arrangement will crumble, and prices will slowly grind lower until this debt overhang is cleared. I am not alone in that conviction.
Irvine Home Address … 25 BIRDSONG Irvine, CA 92604
Resale Home Price … $649,900
Income Requirement ……. $135,335
Down Payment Needed … $129,980
20% Down Conventional
Home Purchase Price … $300,000
Home Purchase Date …. 3/24/1992
Net Gain (Loss) ………. $310,906
Percent Change ………. 116.6%
Annual Appreciation … 4.4%
Mortgage Interest Rate ………. 5.05%
Monthly Mortgage Payment … $2,807
Monthly Cash Outlays …..….… $4,010
Monthly Cost of Ownership … $3,250
Property Details for 25 BIRDSONG Irvine, CA 92604
Baths 3 baths
Home Size 2,178 sq ft
($298 / sq ft)
Lot Size 4,472 sq ft
Year Built 1976
Days on Market 4
Listing Updated 2/17/2010
MLS Number P721972
Property Type Single Family, Residential
According to the listing agent, this listing may be a pre-foreclosure or short sale.
GREAT LOCATION INSIDE YALE LOOP ON CUL-DE SAC! A Must See Home in Highly Desired Woodbridge! This Home Features:4 Bedrooms and 3 Bathrooms ~Spacious Living Room with Cozy Fireplace and Cathedral Ceilings ~Formal Dining Room Opens to Family Room ~Large Kitchen with Center Island, Garden Window, Tile Flooring, Breakfast Nook and Plenty of Cabinets for Extra Storage ~Luxurious Master Suite, Mirrored Closet Doors ~Neutral Carpet and Paint Throughout ~Lots of Windows, Skylights and French Doors Add Natural Sunlight ~Plenty of Closet Space and Storage ~2-Car Attached Garage ~Nicely Landscaped Backyard ~ Enjoy Woodbridge Amenities with Parks, Lakes/Lagoons, Parks, Pools, & Walking Trails ~Award Winning Schools and Conveniently Located Shopping, Entertainment and Freeways.
Title Case? ~Tildes?
Is there a stylistic use of tildes in English? Could I use it ~ or misuse it ~ like a dash? Does it look better ~~ or need ~~ a double tilde? Or does it just lõõk stupid no matter how it's used?
"In MediaWiki, three consecutive tildes (~~~) create a "signature" (which can be customised by the user), five consecutive tildes (~~~~~) result in the time in UTC, and four consecutive tildes (~~~~) result in the signature followed by the time in UTC.
Another recent use of the tilde is to indicate either a "melodic" pronunciation, or a commonly recognized vocal inflection by enclosing a word or entire phrase between a pair of tilde (similar to the use of quotation marks) which indicates that such word or phrase is to be either sung as a tune, ~Happy birthday to you…~, pronounced as a jeer or taunt, ~Nyah, nyah!~, or with a common change in pitch, ~What-EVER!~.
In many online or internet communities, the tilde is used to show a sarcastic or sometimes playful connotation for the word or words to follow it."
It will be interesting to see if I can find an appropriate stylistic use of a tilde….
What grade would you give?
Today's featured property was purchased on 3/24/1992 for $300,000. The owners original financing is unknown, but by 2/7/2000, the owner had a $286,000 first mortgage. Let's use that as a starting point even though it may be off.
- On 12/20/2001 the owners opened a HELOC for $30,000.
- On 4/10/2003 they refinanced the first mortgage for $322,700.
- On 12/2/2003 they opened a HELOC for $100,000.
- On 8/29/2005 they increased the HELOC to $200,000.
- On 6/12/2008 they refinanced the first for $417,000, and they obtained a second for $180,000.
Total property debt is $597,000.
Total mortgage equity withdrawal is $311,000.
IMO, this earns a grade D because these people were periodically and systematically withdrawing the equity from their property at a rate much higher than overspending ordinary lifestyle would indicate; they more than doubled their mortgage. To me, this symbolizes an active anticipation of appreciation and the intent to use as spending money just like income. By my definition, that earns a D.
Recording Date: 01/27/2010
Document Type: Notice of Default
It is also possible that this owner is unemployed, and that they really are willing to repay all the mortgage equity withdrawal, but they can't. Perhaps the lender will dance with them a while longer, or perhaps not.
I like the photo above. The undistorted panorama provides the "feeling" of this room. I would like to see more like these.