More Short Sales and The Elusive Shadow Inventory

[Ted Akers]

What do You Think?

The Wall Street Journal is reporting that studies by Standard and Poors and John Burns Real Estate Consulting conclude that 70% of loan modifications done will delay but not prevent foreclosures. The Burns study predicts up to 5 million homes will go through foreclosure in the next few years and expects “Shadow Inventory†of about ten months supply to hit the market. It is not specific of the timeline but implies inventory will hit the market fairly soon. The article concludes with “As a result, servicers increasingly are looking to arrange short sales, in which homes are sold for less than their loan balancesâ€.

A full copy of the article can be found at:
http://online.wsj.com/article/SB10001424052748703562404575067452797224606.html?KEYWORDS=foreclosure :D

[Scott Hubbard]

My contacts at several lenders (upper management) also confirm their strategy is to release inventory through bulk tapes to prequalified institutional investors. As for Fannie Mae stuff, HUD will continue to manage the oversupply through its normal channels.

The idea for GSE and nonGSE take backs are to release them slowly as to avoid shooting themselves in the foot. Servicers are trying to focus on both stabilizing prices and maximizing savings by avoiding the REO process altogether.

The big REO brokers in my area are now focusing more on short sales becuase the supply has nearly dried-up. This is a much different story from a year ago when none of them would even touch short sales.

Hence, I agree with others, that short sales will be the way to go for the immediate future, but we also can expect further competition from Brokers as their REO supplies are dwindling.