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Inventory, where art thou?

November 3, 2009

Everybody is asking, “when is the inventory coming?” The answer is . . . . no one knows.

  • Notice of Default:                   Prior Month 1.08%          Prior Year:  1 23.44%
  • Notice of Trustee Sale:       Prior Month -5.10%          Prior Year   64.97%

(Stats from Foreclosure Radar 10-13-09)

We keep hearing from the banks that we may have a release from banks/foreclosures after the first of the year, but then again, we have been hearing that for several months. Foreclosure Radar out of Discovery Bay noted in their October newsletter that there is no “shadow inventory” pending.

We are seeing an increase in banks discounting loans on the courthouse steps so that 25% of the homes actually sold at the courthouse steps in September and October, 2009, are being purchased by investors directly at almost a 20% discount. It is unknown if they plan to hold or turn these homes but at least some of these should be put on the market. So once more it is the old story-those that have the money are making the money.

We have heard that some banks are selling to tenants, we actually had one of those which did sell at market value, or trying to sell back to the initial homeowner at a reduced price.

What we do know is that that almost 80% of current sales are either foreclosures or short sales, 60% and 20% respectively. Defaults are continuing to rise but trustee’s sales are down indicating continued slow-down of new inventory in the short term.

Predicting the future is always risky, but we suspect that inventory levels will not begin to rise until April and May next year, due to time lag from trustee’s sale date to vacancy and pre-marketing activities. I do not expect a flood to hit the market all at once. This should keep prices relatively steady and may even show a slight upswing. So, keep your pencils sharpened and continue to write offers only if you are motivated and very well qualified.

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