The Shadow Knows!

Posted By on September 20, 2010

“An incredible 14% of the nearly 54 million first liens in the country are now either delinquent or in default” the Real Estate Channel’s Keith Jurow, observes. “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.

Mortgage Delinquencies

“And, of course, let’s not forget the REOs that have not yet been placed on MLS listings by the bank servicers,” Jurow continues. “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. This massive number of homes will put enormous downward pressure on sale prices. To believe that prices are firming now is to completely ignore this shadow inventory.

www.thedailyreckoning.com

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