Stocks look to close the holiday-shortened week about even. The ECRI Weekly Leading index gained 1.4 points to 122 while the smoothed annualized growth rate edged up to –10.1 indicating that the recession is on again.
There has been much debate over the “shadow inventory” of foreclosed and distressed properties expected to ultimately end up on the market. The trouble was getting accurate numbers on just how extensive this inventory was. The banks weren’t forthcoming as this was part of their extend and pretend strategy designed to maintain asset price levels and avoid, or at least delay costly write downs.
Mybudget360.com took a look at the inventory picture in California and found that like the rest of the country inventory for sale is up sharply since the end of the tax credits in April. Reporting that California MLS inventory has jumped 25% since. Here in Santa Cruz inventory has increased just 14%. MLS as of July reports about 4-months inventory for California or 144,000 units available and 35,000 sales, using broader measures from Zillow and inventory jumps to 280,000 or 8-months, a big difference.
California has about 5.3 million homes with a mortgage, of those some 14% are at least 1 payment delinquent or in some stage of foreclosure meaning about 742,000 properties are distressed. Now not all of these will end up as foreclosures because of the cure rate, meaning that some of them will recover current payment status. But the cure rate has also fallen victim to the real estate crisis and is now down to just 6% as per Fitch Ratings. This means that of the 742,000 distressed properties some 695,000 will go all the way to foreclosure, with 35,000 sales recorded in July this represents almost 20-months of supply. Serving as yet another example of why downward price pressures are and continue to be severe.
There was another example of Loan Mod Hell featured in the LA Times. Seems Wells Fargo strung the home owner along and promised no foreclosure as their HAMP trial proceeded. Said owners kept their end of the bargain, got denied and just 7-days after being informed of this and that they had 30-days to discuss their options with the bank, got a knock on the door from the new owner asking them to surrender the property. Sadly these stories and variations of are a dime a dozen.
Which I’m sure has a lot to do with an attempt being made in the courts at the end of the month to bring class action status to people suffering through modification failures like this involving not just Wells Fargo but B of A, JP Morgan Chase and other major mortgage servicers alleging breach of contract. You would think they would be just a little more amenable considering how many tax-payer Dollars they have received of late.
Hi and welcome to The Profit Motive, I’m your host Caleb Lawrence. Once upon a time in America the media acted as the watchdog of the corporations and the state. In the modern era it’s all about ratings and profits, opinion has been substituted for news and frequently is presented as fact. 
