Dr. Housing Bubble 12/23/09

[Crewleader]

Real Homes of Genius: Culver City Housing Bubble. Housing Shadow Inventory in Action. Countrywide Bank Owned home versus Duplex on Same Block. Foreclosure Holiday.

The shadow inventory issue will be an important factor in how California home prices move in 2010. It isn’t a question of shadow inventory existing since that has already been established but how banks are going to proceed with leaking out the inventory to the market. One spigot used in 2009 revolved around the HAMP loan modifications but as we are finding out, much of these last minute deals simply delayed the inevitable since only a handful of trial modifications became permanent. Yet banks realize the razor edge they are walking on. Should the real inventory make its way onto the market local area comps will be depressed and prices will fall once again. And keep in mind prices haven’t been surging up. We have placed duct tape on the massive crack in the shadow inventory dam and homes are starting to leak out.

Here in California shadow inventory is massive. It is likely that we have the same amount of inventory in the shadows as we do in the actual public MLS. The way home values are derived come from recent local area sales. Bank owned homes sell for much less so banks are holding off inventory trying to allow the artificial supply to juice prices so they can release inventory onto the market later creating a mini bubble. The only reason banks can even do this is because of the crony banking laws and the fact that they have trillions in taxpayer bailout money. The irony of course is that it is a win-win for banks. They can hold off and sell homes at an inflated price with taxpayer money to taxpayers thus taking them for a ride twice. At a certain point you wonder if the public will keep on taking this since lower priced homes will make more sense in this climate with high unemployment and lower wages.

http://www.doctorhousingbubble.com/real-homes-of-genius-culver-city-housing-bubble-housing-shadow-inventory-in-action-countrywide-bank-owned-home-versus-duplex-on-same-block-foreclosure-holiday/

[Crewleader]

1. No Room At The Economy by Jeff Parker

[Warpy]

2. They're being held off the market to avoid a total collapse in prices

and will be put back on the market only when demand picks up again. The banks think houses will sell for more if they don't allow the market to bottom out naturally and then rise than if they reduce inventory in an attempt to keep prices high now.

That didn't work in the last Depression and it's not likely to work now.

What will happen is a lot of properties becoming magnets for vandals, vermin and vagrants and being damaged beyond repair, giving banks more of a net loss than they would have taken had they simply let the chips fall where they might and releasing those properties for sale so that speculators could snap them up for a song and offer them as rentals.

Controlling supply to drive demand prices up only works in good economies.

[clear eye]

3. Might be both smarter and even a little humane if they allowed

the families they foreclosed on to live in the houses as tenants, instead of creating homeless and turning neighborhoods into unmaintained wastelands--as long as they're not reselling them anyway.

[Robb]

4. There has been some movement in that direction

...but really, banks don't want to be landlords any more than most people would. It's a rough way to make a living.