Tag Archives: shadow inventory

Real Estate’s Own Groundhog Day

What was that tag line we used to see on posters promoting Rasta bands at the Catalyst way back when? All Killer – No Filler?

Wouldn’t it be nice if we could channel a little more of that sentiment (and mojo) into the real estate inventory these days. Seems like no matter how many times a day you and I and I go onto the MLS to check for new listings or download search engine e mails…nothing much new “of value” comes on. Just the same old same old.

Tired inventory. Picked-over inventory. Stale-inventory. A warmed-over re-hash of all the stuff that didn’t sell last year. Including a strange menagerie of distress properties. Dubious short sales you can never be sure of and a smattering of REOs banks are pinching out of their systems…starting with the worst first.

The sum total? An uninspiring catalogue of places. Most of which aren’t qualified enough to move anyone anywhere. As in: Move buyers in. And move sellers out.

(Quick disclaimer: Individual Sellers, don’t get bent out of shape here. I’m talking about everyone else’s listing except yours.)

I guess we could say it’s All Filler…Very Little Killer in real estate land right now. Not many killer views, killer yards, killer locations. Or to lower our expectations just a little… not many plain old, modest, middle of the road killer houses packaged up in nice presentations at reasonable price points. Specially right there in the sweet spot zone between $600k and $800k. I don’t know about you…but it’s killin’ me.

Most Agents understand. They’ve got clients calling too. Buyers ready to buy. Or who think they are. Buyers becoming increasingly frustrated with a market that doesn’t seem to offer anything up that fits their needs or price range. And by extension, Buyers frustrated with their own Agents, who become more suspect each week when they fail to turn over enough rocks or the “right” rocks to uncover that special hidden gem waiting out there. Somewhere.

The same Buyers who don’t understand why it is so hard to buy in (what keeps getting sledge-hammered into our heads as) the Perfect Buyers Market. Is it safe to say this isn’t a Perfect Buyers Market?

There are certainly incredible interest rates. Prices have certainly come down a long way. Those are two of the defining characteristics of a Buyers Market. What’s missing? Great places that people actually want to buy. I think some people call it supply. Or maybe “effective” supply would be a better term.

I keep having the same deja-vu experience. Clients who’ve been looking forever, pouring over the on-line pictures of homes for sale, who keep calling and asking to see places they forgot they already saw a year ago. Houses that didn’t work then and aren’t going to work after another 365 days on market and a minimal price reduction. I call this “Deja Viewing”. Stare at the MLS long enough and homes start repeating themselves over and over.

So when’s this slow tortuous drip of new properties coming on going to end? When do the floodgates open? I feel like a kid staring at the classroom clock. Waiting for recess from a hard lesson. The minute hand isn’t moving. The fabric of time is frozen.

Thursday was Groundhog Day and another shadow appeared again this year. Was it just the shadow of a huge shadow inventory? Or was it also the shadowy logic of would-be sellers planning to hold out putting their places on the market, for as long as they can.

Either way, looks like the winter of our buyers’ discontent is going to last at least another six weeks. If we don’t shoot ourselves in the foot that is – by kicking the groundhog down the road even further…

Share

The Shadow Knows

What was that tag line  we used to see on posters promoting Rasta bands at the Catalyst way back when?   All Killer – No Filler?

Wouldn’t it be nice if we could channel a little more of that sentiment (and mojo) into the real estate inventory these days.  Seems like no matter how many times a day you and I and I go onto the MLS to check for new listings or download search engine e mails…nothing much new “of value” comes on. Just the same old same old.

Tired inventory.  Picked-over inventory.  Stale-inventory.  A warmed-over re-hash of all the stuff that didn’t sell last year.  Including a strange menagerie of distress properties.  Dubious short sales you can never be sure of and a smattering of REOs banks are pinching out of their systems…starting with the worst first.

The sum total?  An uninspiring catalogue of places.  Most of which aren’t qualified enough to move anyone anywhere.  As in: Move buyers in. And move sellers out.

(Quick disclaimer:  Individual Sellers, don’t get bent out of shape here. I’m talking about everyone else’s listing except yours.)

I guess we could say it’s All Filler…Very Little Killer in real estate land right now.  Not many killer views, killer yards, killer locations.   Or to lower our epxectations just a little… not many plain old, modest, middle of the road killer houses packaged up in nice presentations at reasonable price points. Specially right there in the sweet spot between $600k and $800k.  I don’t know about you…but it’s killin’ me.

Most Agents understand.  They’ve got clients calling too. Buyers ready to buy.  Or who think they are.  Buyers becoming increasingly frustrated with a market that doesn’t seem to offer anything up that fits their needs or price range.  And by extension, Buyers frustrated with their own Agents, who become more suspect each week when they fail to turn over enough rocks or the “right” rocks to uncover that special hidden gem waiting out there. Somewhere.

The same Buyers who don’t understand why it is so hard to buy in  (what keeps getting sledge-hammered into our heads as) the Perfect Buyers Market.  Is it safe to say this isn’t a Perfect Buyers Market?

There are certainly incredible interest rates. Prices have certainly come down a long way.  Those are two of the defining characteristics of a Buyers Market.  What’s missing?   Great places that people actually want to buy.  I think some people call it supply.  Or maybe “effective supply” would be a better term.

I keep having the same deja-vu experience.  Clients who’ve been looking forever, pouring over the on-line pictures of homes for sale, who keep calling and asking to see places they forgot they already saw a year ago.  Houses that didn’t work then and aren’t going to work after another 365 days on market and a minimal price change.   I call this  “Deja Viewing”. Stare at the MLS long enough and homes start repeating themselves over and over.

So when’s this slow tortuous drip of new properties coming on going to end?  When do the floodgates open? I feel like a kid staring at the classroom clock.  Waiting for recess from a hard lesson. The minute hand isn’t moving. The fabric of time is frozen.

Thursday was Groundhog Day and another shadow appeared again this year.  Was it just the shadow of a huge shadow inventory?  Or was it also the shadowy logic of would-be sellers planning to hold out putting their places on the market for as long as they can.

Either way, looks like the winter of our buyers’ discontent is going to last at least another six weeks.  If we don’t shoot ourselves in the foot that is – by kicking the groundhog down the road even further…

Share

My Brain on Real Estate

It’s not even noon yet and my synapses are already misfiring on all cylinders.  The steady stream of data coming in feels like a bunch of square pegs trying to shove themselves into a dart board full of small, round, empty holes.  My right and left hemispheres might as well be ships passing in the night of day because my deepest gut instincts are in direct disconnect with the spin of information  orbiting a world that’s already wobbling woozily around on its own axis in full tilt boogie.

There’s an image of Adam Smith’s invisible hand of the marketplace, looming large on a video screen inside my head.  It keeps cracking eggs open into a sizzling frying pan while the voice-over in my inner ear keeps saying …”This is your brain on real estate…Any questions?”

Well…yeah. I’ve got some questions.  A  lot of questions.  That’s probably all I do have at the moment. Thank you very much.

Like…what happens when the bottom of the market is going up and the top of the market is coming down at the same time?  What do we call that? And how do we explain that to our clients? Do more and more people and places just get stuffed into a never-ending zone of price and property compression somewhere north of low and south of high?

How dense can it get in that space before the gravity of the situation gives – in one direction or the other?  Can the stirrings at the bottom of the market push the top back up? Or will the weight of all those pie’s hovering in the sky eventually get so heavy, they’ll force a carefully crafted façade of positive perception to fall to earth?

Is there a second dip coming to top off the cone of silence surrounding the shadow inventory of bank-owned properties getting held off the market? Not to mention the shadowier  inventory of  loan modifications not getting done, notices of default not getting foreclosed on, delinquent payments not getting issued notices of default and the next cycle of 5/1 Arm’s getting set (and reset) to appear right around the corner?

Why has the Mortgage Application Index (google it) fallen so abruptly at the same time interest  rates have dropped so remarkably low?  Money at 4.5%?!!  Weren’t they just warning us that rates were going to go up when the Fed Mortgage Purchase Program ended?

Shouldn’t the ranks of eager purchasers lining up to get their pre-approval letters be growing by leaps and bounds?  Aren’t more buyers out there chomping at the bit as summer inventory begins to expand right in middle of their very own buyer’s market?

And while we are asking the questions…even though it is probably true that the market is seasonal and the sellin’ is easiest in the summer when the catfish are jumpin’ and the cotton is high…isn’t it also true that more homes (as in a larger percentage of properties that are actually listed) don’t sell in the summer too? So which is it? Do more homes sell in the summer? Or do more homes not sell in the summer? Or both?

Is this just all about the end of the tax credit for first time buyers that expired on April 30th?   Would first time buyers  really have waited until the second or third week in April to get their loan applications in? Wouldn’t most of them have started their processes sooner?  Did we just move the time horizon up on purchases that would have otherwise happened later?  Like a cash for clunker homes program?  Was this just another version of all of us collectively kicking the can down the road to see if something else might happen in the meantime to pull our asses out of the fire?

Will the real, real estate market ever stand on it’s own again without huge transfusions coming from the Feds?  Or without interest rates being propped artificially down?  Will the private sector be able to make its own rain again? Without a house of cards built on liars loans and credit default swaps.?  Can it pick up the loose reins of laissez -faire even if it feels  very laissez-unfair in the short term?

Is there some secret escape route on the horizon the helps us get out of the Pavlovian Paradigm where we can’t help robbing Peter to pay Paul with yet one more hail Mary pass that leaves the answers blowing in the wind for future generations to figure out?

Time will tell. But not any time soon.  In the meantime, I’ve signed up to have my brain frozen at the cryogenics lab. Wake me up when we get there.

Share

The Shadow Knows…

Shhh. Sh-sh-shhhh. Oops. Sorry. Shhhhh. No, I’m not shushing you. Honest. This is an Advertorial. We’re here to talk about real estate – not keep it on the QT.

My recurring speech impediment has flared up again. Maybe it’s a mild form of Tourettes. Part of my brain is trying to stop another part of my brain from blurting out bad words that aren’t supposed to be heard in public. My inner Gallant is trying to shut up my inner Goofus before he acts out in front of polite company.

Shh-Sh.-Shhh. See, every time I attempt to get a word in edgewise on myself, I begin stuttering. The last time this happened was in 2005 when my lips started twitching every time I tried to talk real estate. A series of b-b-bu-bu-bubs issued forth involuntarily whenever I opened my mouth. It was like some invisible finger of fate was flicking itself across my lower lip. I sounded like I was b-b-busy making goofy b-b-baby noises while there was a really serious rogue elephant stampeding the marketplace.

What finally came stammering up out of my subconscious in a cathartic moment of release was the one word that no one wanted to hear at the time – bubble. By then, it was too late. And the rest is real estate history. History we are still trying to muck our way through in the present tenseness.

But now, I’ve got this sh-sh-sh thing going on. Thankfully all that therapy I had in the past is helping me get to the bottom of my speech pathology quicker this time. So everybody be quiet for real now, ok? Listen up. Shhhh.

I’ve got two important words to say to you. Actually it’s four words, but bear with me. Ready? Sh-sh-sh-shadow inventory. Sh-sh-sh-short sales. Whatever else I say and whatever else anyone tells you and whatever else you believe, these are two of the most important things you can pay attention to right now.

No one is talking about either of these things in a way that does them justice. Sure the words get tossed around. Casual catch-phrases floating through the open house ether. But truly meaningful conversation and analysis in the context of the big picture is conspicuously absent. The silence surrounding both is deafening. All I know, is that the growing size of the shadow inventory and the growing number of short sales are both exerting a huge gravitational pull on the marketplace, in ways we can’t quite grasp or comprehend yet.

Shadow inventory is the name for that the hidden underground vault full of foreclosed properties the banks are hoarding. For reasons we can only guess at, they aren’t ready to recycle their REOs back through the marketplace. They’ve been dribbling a few out here and there but the vast majority haven’t seen the light of day since they fell off the court house steps into the abyss. In fact, apocryphal stories from local REO Agents suggest that the tiny flow of post-foreclosure listings has grown even more constricted these last few months. The drip of damned-up inventory has stalled below a snails pace. Why? Inquiring minds want to know.

At the same time the number of REOs coming on is decreasing, the number of short sales is increasing exponentially. Short sale has to be the dumbest term anyone ever invented for anything having to do with real estate (other than the word “real” itself.) Short sales aren’t short. And to date, not a lot of what we sorta, kinda, wanna think of as short sales as in actual “sales” – have really turned out to be sales at all.

The whole concept of the short sale is fuzzy at best. A clustered FUBAR at worst. A Seller is nominally the Seller, but in the end, after hiring an Agent and marketing the property and negotiating an offer, it is the bank(s) that decides whether a property sells or not. Once a possible sale disappears into the bowels of short sale negotiation anything can happen – including nothing. How do things get decided? How long is it going to take? Who knows? Everything is open- ended. A hope and a prayer with Jiminy Cricket as escrow officer.

Short sales are really just a shadowier kind of inventory than the other kind of shadow inventory. Add them to the huge supply of homes already residing in the limbo of bank land. Sitting on the sidelines. Twiddling their thumbs. Collecting cobwebs. Waiting to be released and unleashed upon the market someday when something or someone decides it’s the right time to let ’em rip right through the tender balance between supply and demand.

As conventional wisdom says Sh-t Happens. As these unconventional times also suggest… a lot of ShSh is going to happen too.

Share

Surreal Estate of Mind: Conspiracy or Confederacy of Dunces?

la_condition_humaine-magritteIn solidarity with the times, I’ve renamed today’s column Surreal Estate of Mind. Surreal is often used, when something real begins to take on an altered, disorienting, dream-like quality. You know. Like real estate. Like right now.

I don’t think Oswald acted alone. Drones and Chem Trails populate the sky. Fluoridation is a communist plot. Old, fat Republicans regularly get naked at Bohemian Grove. Freemasons? Bavarian Illuminati? The pyramid on the dollar bill? Yes. Yes. And more Yes! Sasquatch is alive and well and living wherever he wants. And to be completely honest …I think Eisenhower cut a deal with the aliens at a remote airplane hanger outside of Palm Springs in 1957.

It is all of the rest of life and the way things aren’t working in real estate that I’m not sure of…

Maybe it’s a little-known side-effect of the swine flu pandemic but I keep meeting respectable, hard-working, middle class people infected with an odd, feverish, lingering malaise that causes them to imagine they are deer in the headlights, standing nervously in the eye of a hurricane, waiting quietly for the proverbial other shoe to drop.

I may be a conspiracy buff but I’m not a conspiracy nut. I don’t really want to believe there is some giant, premeditated, not-so-secret, conspiracy going on between the Government and the Big Banks when it comes to controlling the hearts and minds of the collective real estate community. I’d prefer to think there weren’t any additional pairs of unseen hands tugging on puppet strings attached to the invisible hand of the marketplace. Or any Machiavellian plot trying to control and manipulate the entire system that controls and manipulates the entire system that I watch real people interact with and try to feel some modicum of control over in the real world of real estate.

So I’m hoping that some of you, with far greater experience than I – those with more formal training, studied insight, astute knowledge, honed perspective, rational answers, intuitive powers – will step up and shout me down. Because I want you to be my passionate and rabid de-bunkers. I really, truly, don’t want to believe that there is a conspiracy afoot trying to suspend my disbelief and convince me to accept the notion that all is well in real estate land and bank land and economy land. Please, tell me I’m wrong. Tell me I’ve got nothing to worry about. And that my clients have nothing to worry about. Make the surreal-ness of it all make sense just a little sense.

None of us, working in real estate, have ever been in this place before. This is undiscovered country. No map. No pre-packaged GPS system issued with each listing or each buyer’s pre-approval letter or with every escrow that gets opened. No soothing software voice-over ready to dole out directions on how to get there from here (wherever there is and wherever here is.)

So maybe the things I am seeing, aren’t really there at all. Maybe I’m making them up. Maybe they are just the usual suspects that are always around. Maybe they are mere figments of my imagination rather than the shadowy outlines of something more scary and nefarious lurking in my neck of these dark, dark woods. Maybe no one is responsible for the mysterious machinations I see people wrestling with daily. Maybe it’s just bio-rhythms. Or a ginormous confluence of bad hair days. Or Mercury in Retrograde. Exponentially. Up the yin yang.

All I know is, there are lots of trails leading off in different directions in these woods. I don’t know if any off them will eventually lead the real estate industry back home or not. For the time being, if you follow the scattered bread crumbs on any tangent you care to take, it all just gets curiouser and curiouser…

Why doesn’t it feel better in our guts while reaching for each small bone of good news thrown our way?…What happens when big banks control supply (shadow inventory) and demand (credit crunch) simultaneously at the same time?… If the conspirators achieved their immediate goal of heading off total collapse, when are the real changes and reforms in the system going to start?… If real estate is really getting that better, why would we consider paying everyone to buy a home by giving them all tax credits?…Let me repeat that – paying people to buy homes as a sales gimmick to sell the recovery!…Why not force the banks to release the huge inventory of homes locked in their foreclosure vaults?.. Wouldn’t more supply lower prices for first time buyers?…Who is going to pick up the slack and buy the loans the banks are making, when the Feds bow out soon, as they say they are planning to do?… Won’t interest rates go up?… In a jobless recovery, when incomes are necessary to qualify for full doc loans and interest rates go up and so many people who ought to be buyers already can’t afford the low-end clunkers that investors are paying all cash for…how will the market sustain itself?… How can there be recovery?…Where will the demand come from to meet the supply that eventually has to be released?

Inquiring minds want to know. Conspiracy? Or Confederacy of Dunces? Let me know what you know …

Share