The 800 Pound Gorilla

Posted on August 3, 2011 by

Shadow InventoryAlthough the drop in default rates shows promise, the amount of shadow inventory still creates a dark loom over the future of housing prices, according to latest results from Standard & Poor’s U.S. Residential Performance Index. The shadow inventory of unresolved distressed properties is currently at an estimated $405 billion, representing a four-year housing inventory and one-third of the outstanding U.S. non-agency residential mortgage debt. The report states that full recovery will only occur once the supply of distressed properties shrinks to less than a quarter of the current volume. Additionally, the monthly liquidation and cure rates are at about 2.5%. This is due to an overall resolution rate of 5%, where these rates have lingered in the past nine months. The slowing first default rates allows borrowers to resolve loans and clear out the inventory instead of defaulting and adding additional units to the current inventory. – 49% of homeowners think they own more than they owe less than half of homeowners – 49% – currently believe their home is worth more than the amount they still owe on their mortgage. July marks the second month in a row but only the third time since late 2008 that the Rasmussen Reports rate has fallen below 50%. High-income homeowners were more confident in their home values that low-income homeowners and investors were consistently more confident than owner-occupants were. One-third of homeowners believe they are underwater with their mortgage, and 18% of respondents said they were not sure. The rates are the result of a Rasmussen Reports national telephone survey of 676 homeowners. The survey was conducted July 17 and 18, and results were released Thursday.

Relatively unchanged since last month, 7% of homeowners had missed or been late on at least one mortgage payment in the last six months, while 90% had not. Eight% said they were likely to miss or be late on a payment in the next six months, and 89% did not foresee difficulty making their payments over the next six months. Just days before the survey results, on July 19, Rasmussen released the results of another survey, which examined homeowners’ confidence that their home values will increase over the coming year. At 11% confidence, reached an all-time low, according to the survey.

Joe ThompsonJoe Thompson is an experienced business and financial consultant with over 28 years experience. Joe is also a sub group leader for the Atlanta REIA weekly Haves and Wants Meeting, Atlanta’s premier networking meeting for Real Estate Investors having facilitated over $120,000,000 in transactions over its 5 year history.


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