Housing markets need better information. An interesting AP article discusses both the informational problems in determining how big the shadow inventory of housing is, and how informational problems are in part causing the housing inventory:
Economists at CoreLogic, a California company that analyzes mortgage data, weigh in at the low end, charting 1.6 million homes in shadow inventory nationwide. They count homes not listed for sale, with loans that are at least 90 days overdue, in foreclosure or bank-owned.
Others say the shadow is much bigger. Laurie Goodman of Amherst Securities in New York says it covers from 8.3 million to 10.4 million homes. Goodman’s analysis includes homes with loans that are at least 60 days overdue, have been delinquent in the past and are likely to go into default again, and thousands of homes whose owners are making payments but are likely to give up because they are so far “underwater,” in homes worth less than they owe.
“The question is `how long is the shadow?'” Goodman says. “I think some people are definitely underestimating the seriousness of the problem.”
And more on the difficulty in reading price signals in this environment:
But investors and those who represent them complain banks are not realistic about the prices they’ll accept. Verna, the real estate agent specializing in distressed properties, says that slowing the flow of homes into the market creates an artificially low inventory in some neighborhoods, which can temporarily lift prices. At the same time, lenders are increasingly selling homes or the underlying loans in bulk to hedge funds.
That’s where Verna comes in, tracking down borrowers to convince them to trade deeds for cash, and turning around homes like the building on 21st Street for resale. This takes patience and a strong stomach. Abandoned homes are frequently trashed or occupied by squatters. Borrowers are difficult to track down and reluctant to talk.
Verna has tracked one homeowner from address to address to address. Each time the real estate agent thinks he’s caught up, the man has moved again.
At this rate, Verna figures it will be three to five years before lenders let all the homes go. The risk is that, by moving too slowly they could artificially raise prices in some areas, which might spur investors who bought homes as rentals to put them up for sale.
H/T Market Urbanism