Bank sees huge "shadow inventory" of foreclosed houses

An update to my earlier post about inventory issues, which briefly discussed the concept of "shadow inventory." In that post, I wrote of "a theory floating around various blogs that listed inventory is deceptive because banks and lenders are quietly sitting on large and growing piles of foreclosed houses -- so-called shadow inventory."

It's a bit more than a theory floating around a few blogs, as Sacramento Real Estate Statistics reports in this excellent post, which quotes extensively from a Deutsche Bank report on the subject of shadow inventory. Highlights of the Deutsche Bank report:    

"MLS listings are missing large amounts of distressed inventory 

... Based on our analysis, MLS based listing inventory is significantly understating the extent of foreclosure inventory in many markets."

The Deutsche Bank report is the source of a shocking number you may have seen in the comment section. Based on the bank's research and estimates, the inventory of foreclosed homes in Greater Los Angeles stands at 88,843 units; that is far higher than the entire MLS-listed inventory for the metro area, 62,379. The bank's estimates are based on various sources that include pre-foreclosure filings as tabulated by RealtyTrac. My analysis is that it is likely the 88,843 estimate is higher than the actual number of foreclosed houses in Los Angeles, but it still a staggeringly high estimate.

--Peter Viles

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com

Hat tip: Patrick.net

Could this be a trend? Home sales up in Riverside County*

A report today by the California Assn. of Realtors says sales of existing homes were up 17.5% statewide in June from a year ago: 420,550 single-family homes were sold in June at a seasonally adjusted rate, versus 357,890 in June 2007. A big reason for the increase: bargain hunting at the lower end of the price range.

"Sales were driven in part by larges shares of deeply discounted distressed sales in many parts of the state," said CAR president William E. Brown.

The counties showing the most sales strength were, not surprisingly, those hardest hit by foreclosures. Sales in Sacramento County nearly doubled, according to CAR's seasonally unadjusted data; in Riverside County, sales jumped 75%.

This is more or less in keeping with data released last week by research firm DataQuick Information Systems. For the month of June, DataQuick reported, sales were in positive territory in the Inland Empire.

Nonetheless, by all measures prices continue to decline -- according to the Realtors, the statewide median home price declined 37.7% to $368,250 -- no doubt because all these resurgent home buyers are driving hard bargains.

*Update and clarification:

The reason the C.A.R. numbers differ from the DataQuick numbers is because C.A.R. uses seasonally adjusted data. From its report today:

The statewide sales figures represents what the total number of homes sold during 2008 would be if sales maintained the June pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.

Posted by Annette Haddad

Photo: Associated Press

Question? Comments? Email: annette.haddad@latimes.com

A market overview: 'It's pretty ugly out there'

This wide-ranging market overview, to be published in Sunday's L.A. Times, but now available online, is worth checking out. Headline: "The Muted Market."

Highlights:

--"It's pretty ugly out there," says longtime Coldwell Banker broker David Toyama.  He says business is down 50% from last year.

--Inventory, expressed in months to sell, is running nearly three times greater than historical averages. In February, inventory in L.A. County stood at 21.2 months' worth of sales -- up from 10.6 months a year ago.

--One seller learned the hard (expensive) way how not to sell into a declining market: She listed her West Covina house for $600,000 in February 2007, reduced it to $550,000, then $480,000, then $460,000. She finally sold it after 11 months on the market, for $440,000.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: L.A. Times