Does New Jersey Have a Shadow Inventory of Homes

A recent article in the RealEstateChannel provided some sobering statistics for the near future of real estate prices across the country.  While no New Jersey metropolitan area made the top 25 list, the logic will certainly apply to real estate markets coast to coast, if only through the trickle down effects of the problems in those major cities.

Here are some highlights from the article, and a link to read the entire post, Shadow Inventory, an Avalanche That's Coming Soon?, by Keith Jurow.

• "Shadow Inventory Defined
  Rather than joining the dispute about what the term actually means, I will simply define it in this way: The "Shadow Inventory" is comprised of all those distressed residential properties (other than MLS listings) which we know will almost certainly be coming onto the market in the not-to-distant future.
• MLS Foreclosures - Only the Tip of the IcebergThe starting point in discussing the shadow inventory has to be homes actually on MLS listings around the country. With the plunge in home sales starting in July, the number of listings has risen substantially since the spring.  The percentage of total listings that are bank-owned properties has declined over the last year, while the percentage which are short-sale listings has risen tremendously during the same period.
  With regard to shadow inventory, the key question is how many foreclosed and repossessed properties are now either in the inventory of banks or held on behalf of residential mortgage-backed securities (RMBS) investors whose loans they service.  Estimates start at about 500,000 and go up from there.   Whatever the number is, it seems clear that the vast majority of these properties are not currently on the market.
• Defaulted Properties Heading for the Resale MarketIn addition to repossessed properties held off the market, the shadow inventory includes all the homes which have been placed into default - the first stage of foreclosure proceedings. According to Lender Processing Services' July Mortgage Monitor report, there are now 2.02 million properties in default. This number has not declined in the past year in spite of more than one million trial mortgage modifications.  While many of these defaulted properties throughout the nation will escape foreclosure by means of a short sale, the rest will move on to foreclosure proceedings and eventual trustee sale to a third party or repossession by the lender.
• Delinquent Homeowners - The Number Just Keeps GrowingYou could argue that the shadow inventory is the total of repossessed homes not yet on the market and defaulted homes that will move into foreclosure. However, there is also the matter of homes which are seriously delinquent in mortgage payments. A delinquency of 90+ days now means almost certain foreclosure or short sale.  (Here the author discusses the cure rate and why many homeowners who fall behind cannot then return to on-time payments.)
• Concentration of the Shadow Inventory in 25 Major MetrosIt is very important to understand that this enormous shadow inventory of distressed properties that will eventually be thrown onto the resale market is heavily concentrated in a limited number of metros. According to data provided by Lender Processing Services, 52% of the nationwide 90 day delinquencies and 58% of the defaults are concentrated in 25 major metros.
• SummationAn incredible 14% of the nearly 54 million first liens in the country are now either delinquent or in default.  To come up with a total for the shadow inventory, let's first add the total number of loans in default to those delinquent 90 days or more since we know that these loans are headed for foreclosure or a short sale. That comes to 4.5 million properties. Based on the cure rate for loans delinquent at least 60 days, we will add 95% of those 60-day delinquencies. That is an additional 723,000 residences. For the same reason, we will add 70% of those delinquent for at least 30 days - 1.25 million properties.
  And, of course, let's not forget the REOs that have not yet been placed on MLS listings by the bank servicers. We'll be conservative and estimate them at 500,000.
  Adding all of these together, we come up with a total of roughly 6.97 million residences which are almost certainly going to be thrown onto the resale market as distressed properties at some point in the not-too-distant future."

These are astounding statistics and cannot be applied wholesale to every community.  But many homeowners will be affected and more will have to use the short sale process.

If you are having problems meeting your mortgage payments, call or email me now.  Don't wait for foreclosure or even the threat of a foreclosure.  You have options.

I am experienced in short sales representing both buyers and sellers.  Let me help.

Joe Giancarli, SA
Short Sale Specialist
Real Estate Advisor
http://www.joegiancarli.com/
jgiancarli@remax.net
609-658-2612
http://www.njhomesource.com/
http://www.newjerseynewhomes.blogspot.com/
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