Phantom Inventories can be Deceiving (Simi Valley housing report)
We are constantly hearing all the time that Simi Valley housing inventories are shrinking and that sales are picking up. I have talked about it in my market updates. Let me put this in context. What most are not aware of is the Phantom Inventory that has not been put on the open market; meaning that the Banks are carrying a much large amount of inventory and this inventory has intentionally not been submitted to the Multiple Listing Services to be marketed.
As a REO agent for a southern California bank, I have seen the Phantom Inventory in action. Just two weeks ago I was assigned a property in Simi Valley. The typical procedure includes determining if anyone is living in the property and if that is the case, then I am authorized to work to get the occupant(s) out. This particular property I was told that if there as anyone occupying the property to report back and wait before proceeding. Essentially the hold over occupants will be living in property and will continue to live rent free until the bank decides it is time to move forward.
RealtyTrac, an online service that provides pre-foreclosure and post foreclosure property data, claims that they have more homes in their database counts than what is listed on the Multiple Listing service according to a recent CNN article.
Several of the listings I have, sat vacant for several weeks before I was given the okay to start marketing. This lag can create a false picture to those agents that are not monitoring the markets and general public who rely on traditional news sources for their information.
Typically real estate performance reports are generated from data provided by DataQuick, however this service does not show the differences between the MLS databases and RealtyTrac. Nor dose the anyone but broker subscribers have access to the MLS data and reports to make those comparisons.
What this all boils down too as you hear the hype about increased sales; know that there is still a large volume of foreclosed properties that have yet enter the market. There is still a large number of pre-foreclosure properties that are right behind the Phantom Inventory.
This real estate inventory build up is much like the build up of snow at ski resorts. The ski patrol goes out early in the morning and intentionally creates avalanches to ease the pressure of the snow build up so a larger more dangerous avalanche does not occur while skiers are out during the day.
If the government and the banks are not careful and do not start to release some of the build up in inventory, we could get hit by a avalanche of inventory all at once and drive prices down at much larger percentages than what is already projected.
S.B. 1137 really slowed down things down for a bit. Now with this loan mod smoke & mirrors playing along all it is doing is stringing along the inevitable.
It kind of looks like to me the servicers are keeping about a months worth of inventory on the market at any one time. It really wouldn’t help them that much to put more on the market since they are competing with themselves. But it could be that their support infrastructure only can handle so much load and that equates to about a months supply locally. There are a lot of vacant short sales out there as well, which seems to be the bank not wanting to add another REO to the pile but the borrower wanting nothing to do with the home anymore.
Random,
It’s hard to tell. I know that the Asset Managers have a huge load. Even if they they were holding back to control volume, the better REOs are going out quickly with multiple offers.
I left a reply to Bridget on her blog post. You can read it there by clicking through the pingback link.
It may not be “phantom inventory,” but there are certainly a lot of REOs that sit idle for many months before listing. I personally think it’s a mixture of incompetance and manipulation.
Thanks for posting! 🙂 PS
Patrick,
Thanks for stopping by and commenting. I am beginning to realize that it is more that the Asset Managers are salaried employees with as many as 80 or more properties each. They are overloaded and some can handle the strain better than others. What exacerbates the situation is that many times they unknowingly hire incompetent agents.
I have been a proponent that REO listing agents should have heavy property management skills.