Flood of foreclosures: It's worse than you think

[Pale Blue Dot]

Housing might be in worse shape than we think.

There is probably even more excess housing inventory gumming up the market than current statistics indicate, thanks to a wave of foreclosures that has yet to hit the market.

The problem: Many foreclosed homes and other distressed properties that are now owned by banks have yet to be listed for sale. The volume of this so-called 'ghost inventory' could be substantial enough to depress already steeply falling prices when it does go on the market.

"That's not good news," said Pat Newport, an analyst with IHS Global Insight. " inventory is the biggest problem in housing these days, and it leads to lower housing prices, which leads to more foreclosures."

RealtyTrac, the online marketer of foreclosed properties, recently discovered that it has far more foreclosed properties listed in its database, which the company compiles using courthouse records, than there are listed in the multiple listing services (MLS) maintained by real estate agents.

http://money.cnn.com/2009/01/21/real_estate/ghost_inven...

I happen to believe that everything's in worse shape than we think.

[Liberal_in_LA]

1. How bad can things get?

[barb162]

10. Way worse tha now. I think many of the mortgages written the last few yrs

were ones that will be foreclosed.

[jimlup]

2. Did you catch the 60 minutes several weeks ago ...

... argued that their was a 2nd shoe yet to drop due to the adjustable rate morgages that have yet to hit borrowers - most of whom are hurting badly from the first wave.

http://www.youtube.com/watch?v=iUuROWEMjm0

I've sold all of my "REAL ESTATE" shares in my 401k and I'm considering protecting other portions as well.

[elocs]

4. I can't understand why so many Americans evidently felt they were obligated

to helplessly watch their investments go down the drain. I have a Roth IRA which I had a good chunk invested in an energy fund. When the price of oil started plummeting along with the price of the fund I dumped it. As a result I lost no money in that IRA last year.

[jimlup]

7. Yes,

I got wind of trouble from DU in December 2007 and made my 401K safe except for real estate. Then this past December I exited my real estate too. I've only lost some that I put in to riskier investments this year as I dollar-cost-averaged in assuming we'd hit a bottom soon.

Right now, I think maybe we have not. We'll know in a couple of months if this was a false bottom.

[Pale Blue Dot]

8. Because what goes down must go up (or so we were told).

The only explanation as to why this was so was something like, “markets are cyclical. That's what always happens. They offered no evidence as to why that was so, and why it must happen again.

[barb162]

11. They're full of crap. This can stay down for decades

as this country goes to pot.

[shirlden]

3. I have been following

the foreclosure market here in Columbus and Franklin Co Ohio, closely for several months with the idea of perhaps getting some good deals.
You are right..........the list of props for sale is growing shorter as the list of foreclosures is getting longer. Plus, I have noticed that the "good deals" are less and less. I just thought that the speculators were buying up the good stuff before it got to me.
Thanks for posting this.
How would the banks benefit by not listing the props? Is this just to attempt to keep RE values from tanking faster??

[Hawkowl]

5. Bank balance sheet games

I think the reason the banks are not selling the foreclosed properties is to artificially keep their balance sheets in the black. If the banks simply liquidate these properties en masse they will become insolvent. For example say a bank has made a $200,000 loan on a property originally valued at $250,000. Originally the bank carries the $200K loan as an asset. Then the borrower defaults and the bank no longer has a $200K asset. But the bank seizes the property and can show it as a $250K asset. However, lets say that the property is really only worth $100K, so really the bank has lost $100K on the loan. By not selling the property, the bank can pretend it has more money than it actually does and can stay in business.

I have a feeling this is all going to come crashing down at once.

[safeinOhio]

6. This seems to almost always work for me

When every one else is selling, BUY.
When every one else is buying, SELL.

I am living in a wonderful home I purchased from a bank that took it in as a "deed in lieu". It was like buying my dream house for half price(in central Ohio). Was able to pay cash.
I have been going to Sheriff sales and the crowds of buyers from a few months ago are reduced to a few people now. Would like to buy another to fix up, as an investment and to give me something to do. I'm retired and can't seem to find any part time jobs.

[Art_from_Ark]

13. How does this sound?

When everyone else is selling Enron/WorldCom/LehmanBros, BUY!
When everyone else is selling dilapidated houses in Gary, Indiana, or Flint, Michigan, BUY!
When everyone else is selling British pounds at $2.15/pound, BUY!
When everyone else is buying gold at $290/ounce, SELL!

[barb162]

9. A friend works on them and she says there are tons and they keep coming.

[CoffeeCat]

12. We bought a house three years ago...

..and we were very conservative with our money. We didn't buy more house than
we could afford.

However, if I had a time machine, I would have stayed put in our 2 BR condo, even with
our two kids.

NO matter who you are--no matter how smart you've been with finances, it's scary out there.