REOs Leased by Bank Considered Shadow Inventory?

While I disagree with NewportSkipper's tone at times, I personally believe he is accurate on the facts. That is, prices in Irvine are stable (check any website like Redfin for easy confirmation of this), and that there is minimal to no shadow inventory. (My definition of shadow inventory: Bank owned properties that are in saleable condition that are not on the market or being actively prepared for sale. Propeties that have not yet been taken back by the bank but are in default are "pre-shadow inventory", not shadow inventory, in my mind-they may never become bank owned.)



Back to the first question, I would personally not count bank owned leased properties as shadow inventory. Basically, if a property is occupied, it can't really be called shadow inventory. This could be a leased property, or a property where the former owner is still occupying the property even after foreclosure due to legal maneuveurs or sheer squatting.
 
My prediction:



TIC is currently in secret negotiations with every bank holding/servicing mortgages for properties in Irvine to purchase the homes en masse after they become REO. They will then lease them through a third party corporation until housing prices begin to recover in the surrounding areas, keeping the flood of shadow inventory at bay. This will result in sticky RE prices across Irvine, allowing NewportSkipper and RoLarUSC a final round of "I told you so" posts before fading back into obscurity, and leaving IrvineRenter and graphrix sputtering at their keyboards and switching their avatars to this:

<img src="http://ecx.images-amazon.com/images/I/61bES4Pwg+L._SL500_AA259_.gif" alt="" />
 
[quote author="trrenter" date=1252979370][quote author="NewportSkipper" date=1252977129]Here's someplace you might be familiar with, trrenter:



Turtle Rock - Sierra streets 2009 sales:



19491 Sierra Soto Rd? 1,615 $809,250 $501

19511 Sierra Santo Rd? 1,836 $865,000 $471

5421 Sierra Verde Rd? 1,572 $825,000 $525

19262 Sierra Inez Rd? 2,020 $855,000 $423

19451 Sierra Santo Rd? 2,043 $850,000 $416

19442 Sierra Mia Rd? 1,637 $875,000 $535

19481 Sierra Santo Rd? 2,044 $882,500 $432

19422 Sierra Chula Rd? 2,016 $900,000 $446

19141 Sierra Maria? 2,300 $939,900 $409

19531 sierra soto? 2,020 $880,000 $436

6262 Sierra Palos? 2,459 $1,113,000 $453

19125 Sierra Majorca Rd? 3,336 $1,350,000 $405



Average price per square foot = $454





Turtle Rock - Sierra streets 2008 sales:



6302 Sierra Elena Rd? 1,830 $780,000 $426

6161 Sierra Bravo? 1,580 $780,000 $494

5772 Sierra Casa? 1,650 $839,000 $508

5302 Sierra Roja Rd? 1,717 $820,000 $478

19262 Sierra Cadiz Rd? 1,549 $825,000 $533

5841 Sierra Cielo Rd? 2,107 $880,000 $418

6022 Sierra Siena Rd? 2,033 $920,000 $453

19261 Sierra Gerona? 1,717 $979,000 $570

19221 Sierra Gerona Rd? 2,261 $941,500 $416

19532 Sierra Raton Rd? 2,400 $965,000 $402

6141 Sierra Bravo? 3,800 $1,455,000 $383



Average price per square foot = $462</blockquote>


19501 Sierra Soto 2,500 sqft Asking price 969k - $388 per sq ft. on redfin 129 days

19502 Seirra Soto 2,519 sqft Asking price 975k - $387 per sq ft. on redfin 57 days

6002 Sierra Siena Rd 2516 Asking price $1,069,000 $425 per sq ft on redfin 62 days

1941 Sierra Noche Rd 3216 sqft Asking price 999k $411 per sq ft on redfin 96 days.



You should run out to this neighborhood and let these people know they severly undercutting what todays market will bear.



That idiot on 19501 Sierra Soto should raise his asking price to $501 per sq ft like his neighbor at 19491 got and that should make it sell immediatly. That dope has been on redfin for 129 days because he is priced $113 per sq ft to low.</blockquote>


Noticeably absent: acknowledgement of the strength of closed sales - the only thing that tells the truth.
 
<blockquote>Noticeably absent: acknowledgement of the strength of closed sales - the only thing that tells the truth.

</blockquote>


What?



Ok I acknowledge that the sales closed. I don't know that is a strength but if you insist.



How are closed sales teh onlyt thing that tells the truth.



Noticeably absent from you: acknowledgement that those homes I listed are indeed sitting on the market at a much lower price per square foot which is a better indicator then your past closed sales.



What a ridicuolous statement. Don't look at what they are listed for today look what they sold for 8 months ago.



The going market rate is not what you tried to portray it to be.



Did you not think to take 3 minutes to go to redfin and see what the asking price per square foot is today.



That is where the market is. Oh and if a house sits on the market for 129 days it may be priced to high.
 
[quote author="Nude" date=1252980586]My prediction:



TIC is currently in secret negotiations with every bank holding/servicing mortgages for properties in Irvine to purchase the homes en masse after they become REO. They will then lease them through a third party corporation until housing prices begin to recover in the surrounding areas, keeping the flood of shadow inventory at bay. This will result in sticky RE prices across Irvine, allowing NewportSkipper and RoLarUSC a final round of "I told you so" posts before fading back into obscurity, and leaving IrvineRenter and graphrix sputtering at their keyboards and switching their avatars to this:

<img src="http://ecx.images-amazon.com/images/I/61bES4Pwg+L._SL500_AA259_.gif" alt="" /></blockquote>


LAMO lulz. A real knee slapper there!
 
[quote author="trrenter" date=1252983492]<blockquote>Noticeably absent: acknowledgement of the strength of closed sales - the only thing that tells the truth.

</blockquote>


What?



Ok I acknowledge that the sales closed. I don't know that is a strength but if you insist.



How are closed sales teh onlyt thing that tells the truth.



Noticeably absent from you: acknowledgement that those homes I listed are indeed sitting on the market at a much lower price per square foot which is a better indicator then your past closed sales.



What a ridicuolous statement. Don't look at what they are listed for today look what they sold for 8 months ago.



The going market rate is not what you tried to portray it to be.



Did you not think to take 3 minutes to go to redfin and see what the asking price per square foot is today.



That is where the market is. Oh and if a house sits on the market for 129 days it may be priced to high.</blockquote>


The facts speak for themselves. Cherry-pick all you want.



Turtle Rock - Sierra streets 2009 sales:



19491 Sierra Soto Rd 1,615 $809,250 $501

19511 Sierra Santo Rd 1,836 $865,000 $471

5421 Sierra Verde Rd 1,572 $825,000 $525

19262 Sierra Inez Rd 2,020 $855,000 $423

19451 Sierra Santo Rd 2,043 $850,000 $416

19442 Sierra Mia Rd 1,637 $875,000 $535

19481 Sierra Santo Rd 2,044 $882,500 $432

19422 Sierra Chula Rd 2,016 $900,000 $446

19141 Sierra Maria 2,300 $939,900 $409

19531 sierra soto 2,020 $880,000 $436

6262 Sierra Palos 2,459 $1,113,000 $453

19125 Sierra Majorca Rd 3,336 $1,350,000 $405
 
[quote author="NewportSkipper" date=1252984111]The facts speak for themselves. Cherry-pick all you want.



Turtle Rock - Sierra streets 2009 sales:



19491 Sierra Soto Rd 1,615 $809,250 $501

19511 Sierra Santo Rd 1,836 $865,000 $471

5421 Sierra Verde Rd 1,572 $825,000 $525

19262 Sierra Inez Rd 2,020 $855,000 $423

19451 Sierra Santo Rd 2,043 $850,000 $416

19442 Sierra Mia Rd 1,637 $875,000 $535

19481 Sierra Santo Rd 2,044 $882,500 $432

19422 Sierra Chula Rd 2,016 $900,000 $446

19141 Sierra Maria 2,300 $939,900 $409

19531 sierra soto 2,020 $880,000 $436

6262 Sierra Palos 2,459 $1,113,000 $453

19125 Sierra Majorca Rd 3,336 $1,350,000 $405</blockquote>


Could you sort them so they are in order by closing date and include the closing date? Thanks.
 
[quote author="NewportSkipper" date=1252984111][quote author="trrenter" date=1252983492]<blockquote>Noticeably absent: acknowledgement of the strength of closed sales - the only thing that tells the truth.

</blockquote>


What?



Ok I acknowledge that the sales closed. I don't know that is a strength but if you insist.



How are closed sales teh onlyt thing that tells the truth.



Noticeably absent from you: acknowledgement that those homes I listed are indeed sitting on the market at a much lower price per square foot which is a better indicator then your past closed sales.



What a ridicuolous statement. Don't look at what they are listed for today look what they sold for 8 months ago.



The going market rate is not what you tried to portray it to be.



Did you not think to take 3 minutes to go to redfin and see what the asking price per square foot is today.



That is where the market is. Oh and if a house sits on the market for 129 days it may be priced to high.</blockquote>


The facts speak for themselves. Cherry-pick all you want.



Turtle Rock - Sierra streets 2009 sales:



19491 Sierra Soto Rd 1,615 $809,250 $501

19511 Sierra Santo Rd 1,836 $865,000 $471

5421 Sierra Verde Rd 1,572 $825,000 $525

19262 Sierra Inez Rd 2,020 $855,000 $423

19451 Sierra Santo Rd 2,043 $850,000 $416

19442 Sierra Mia Rd 1,637 $875,000 $535

19481 Sierra Santo Rd 2,044 $882,500 $432

19422 Sierra Chula Rd 2,016 $900,000 $446

19141 Sierra Maria 2,300 $939,900 $409

19531 sierra soto 2,020 $880,000 $436

6262 Sierra Palos 2,459 $1,113,000 $453

19125 Sierra Majorca Rd 3,336 $1,350,000 $405</blockquote>


You are correct those are the old facts.



New Facts <a href="http://www.redfin.com/search#lat=33.63279067853072&long;=-117.81568765640259&market=socal&region_id=9361&region_type=6&status=1&v=5&zoomLevel=16">Sierra listings from redfin</a>



I did not cherry pick I tried to get active listings on the same streets that you gave examples of previous sales. That way we were comparing apples to apples. I found some active listings on the same exact streets and posted what .... wait for it..... wait for it......



What people are asking per SQ FT <strong>TODAY</strong>



You can't argue that the only two houses on Sierra Sotto that are listed are listed at $388 per square foot.



That is the real truth... the only truth.... you can't handle the truth



<img src="http://weblogs.sun-sentinel.com/news/weather/hurricane/blog/nicholson-thumb.jpg" alt="" />
 
Notice the fairly linear inverse correlations between price/sq.ft. and size of the home. The current sample of thhe Sierra's provides a $ sq. ft of $396. Keep in mind this is the ASK, and closed sales for organic listing have typically come in a few percent less than previous ask. Eliminating the high and low asks yields a slightly lower $389 on the ask per sq. ft. These numbers are substantially lower than the closed sales figures for the first 3/5 of 2009, indicating a downward trend in prices and a resumption of the inexorable march toward rental parity.
 
I guess that REO in Malibu is going back on the market.



<a href="http://www.cnbc.com/id/32846032">http://www.cnbc.com/id/32846032</a>
 
19262 Sierra Inez Rd 2,020 $855,000 $423



Not sure on the loss on this one, but it was at least $50k+ and maybe more like $200k. Poor guy would have been alright, had he not MEW'd out from his 03 purchase.
 
[quote author="CapitalismWorks" date=1252985480]Notice the fairly linear inverse correlations between price/sq.ft. and size of the home. The current sample of thhe Sierra's provides a $ sq. ft of $396. Keep in mind this is the ASK, and closed sales for organic listing have typically come in a few percent less than previous ask. Eliminating the high and low asks yields a slightly lower $389 on the ask per sq. ft. These numbers are substantially lower than the closed sales figures for the first 3/5 of 2009, indicating a downward trend in prices and a resumption of the inexorable march toward rental parity.</blockquote>
The inexorable march. Vivo lo rojo!
 
The house we are leasing is a bank owned house. Our property manager said that she has a ton of them. Originally, when we moved in in January, the bank's plan was to do a one year lease, and then put it on the market. The property manager told us that some of the leases are up, and the bank is saying to extend the leases for 2 more years, and that there is no way they are putting them on the market for at least another 2 years.
 
[quote author="mamaguza" date=1253101063]The house we are leasing is a bank owned house. Our property manager said that she has a ton of them. Originally, when we moved in in January, the bank's plan was to do a one year lease, and then put it on the market. The property manager told us that some of the leases are up, and the bank is saying to extend the leases for 2 more years, and that there is no way they are putting them on the market for at least another 2 years.</blockquote>


That's really interesting. Did you find your current lease on the MLS or through another source?
 
<a href="http://thomas.loc.gov/cgi-bin/bdquery/z?d111:HR2529:/">H.R.2529 To amend the Federal Deposit Insurance Act to authorize depository institutions and depository institution holding companies to lease foreclosed property held by such institutions and companies for up to 5 years, and for other purposes.</a>
 
[quote author="trrenter" date=1253141052]<a href="http://thomas.loc.gov/cgi-bin/bdquery/z?d111:HR2529:/">H.R.2529 To amend the Federal Deposit Insurance Act to authorize depository institutions and depository institution holding companies to lease foreclosed property held by such institutions and companies for up to 5 years, and for other purposes.</a></blockquote>


Maybe the banks will start to do this more, lease out properties instead of selling them, hoping prices will rise in a few years. Pretty smart plan, IMHO. They get the lease income, and I doubt prices will fall much further.



Edit: However, that is just a bill (cue School House Rock skit). It's not law yet, and may never become so, although Barney Frank is one of the cosponsors, which makes the likelyhood of it at least leaving committee to be high.
 
[quote author="Geotpf" date=1253143369][quote author="trrenter" date=1253141052]<a href="http://thomas.loc.gov/cgi-bin/bdquery/z?d111:HR2529:/">H.R.2529 To amend the Federal Deposit Insurance Act to authorize depository institutions and depository institution holding companies to lease foreclosed property held by such institutions and companies for up to 5 years, and for other purposes.</a></blockquote>


Maybe the banks will start to do this more, lease out properties instead of selling them, hoping prices will rise in a few years. Pretty smart plan, IMHO. They get the lease income, and I doubt prices will fall much further.



Edit: However, that is just a bill (cue School House Rock skit). It's not law yet, and may never become so, although Barney Frank is one of the cosponsors, which makes the likelyhood of it at least leaving committee to be high.</blockquote>
More likely they will lease the property and it cost them way more in opportunity costs and depreciation as prices continue to fall.
 
[quote author="awgee" date=1253153999][quote author="Geotpf" date=1253143369][quote author="trrenter" date=1253141052]<a href="http://thomas.loc.gov/cgi-bin/bdquery/z?d111:HR2529:/">H.R.2529 To amend the Federal Deposit Insurance Act to authorize depository institutions and depository institution holding companies to lease foreclosed property held by such institutions and companies for up to 5 years, and for other purposes.</a></blockquote>


Maybe the banks will start to do this more, lease out properties instead of selling them, hoping prices will rise in a few years. Pretty smart plan, IMHO. They get the lease income, and I doubt prices will fall much further.



Edit: However, that is just a bill (cue School House Rock skit). It's not law yet, and may never become so, although Barney Frank is one of the cosponsors, which makes the likelyhood of it at least leaving committee to be high.</blockquote>
More likely they will lease the property and it cost them way more in opportunity costs and depreciation as prices continue to fall.</blockquote>


This is uncharted territory for the banks, injecting a new layer(s) of risk into their operations and results. Shouldn't the government be helping to simplify the banking industry given that extreme complexity (beyond core businesses) resulted in the opacity that allowed a near death of the entire global financial system.
 
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