RealEstateEconomyWatch.com Insight and Intelligence on Residential Real Estate
Standard and Poor’s Rating Services’ estimates that the time it will take to clear the supply of distressed homes, or the shadow inventory, on the U.S. market is now 46 months. For the city with the greatest estimate of the time it will take to clear its inventory of foreclosures and short sales, New York City, it will take 202 months, or nearly 17 years.
A huge inventory of nonperforming mortgages in the U.S., but the regional variations in the speed at which servicers can clear the loans are primarily due to differences in foreclosure procedures. As of first-quarter 2012, S&P’s months-to-clear estimate in judicial states is almost 2.5 times as long as nonjudicial states.
The volume of these distressed U.S. nonagency residential mortgages (which excludes loans from government sponsored entities, such as Fannie Mae and Freddie Mac) remained extremely high at $354 billion in the first quarter, but it has declined in each quarter since mid-2010. This latest number, which is based on the original balances of the loans in the shadow inventory, represents slightly less than one-third of the outstanding nonagency residential mortgage-backed securities (RMBS) market in the U.S.
New York City’s distressed inventory ranks largest in the nation with the highest months-to-clear, at 202 months. Boston ranks next at 86 months, then Chicago with 72 and Atlanta with 71 months.
Although liquidation rates seem to have leveled off, it’s still taking servicers longer to foreclose, S&P found that recently liquidated loans missed payments for an average of almost two-and-a-half years before being closed.
- S&P estimates it will take 46 months to clear the national shadow inventory. This is down one month from fourth-quarter 2011.
- Differences in liquidation rates between states are creating a large and growing difference in regional estimates of the months-to-clear.
- The U.S. monthly first default rate fell to 0.67 percent in March 2012, the lowest level since May 2007.
I don’t know where these rating services take their numbers from. They just don’t make any sense and obviously, they don’t have any insight on what’s really going on in the real estate market. The fact is, that inventories are at a 7 year low. We don’t have enough homes to sell, and banks or HUD either don’t list enough homes to sell, or they don’t have enough homes to sell.
If you are serious about what is going on in the frolceosure market…you must read this comment!Well…I am not surprise of this action by the homeowners. Homeowners are just sick and tired of the dumb actions being taken by the Lenders, servicers and the government. I am going to say this again…the so called experts and the mortgage business and the government as well…knows everything about the stock market, but have no clue about real estate. That’s the real problem. The industry is living on 50 years old plus policies that doesn’t work in a down economy. The current policies will never work when frolceosures are at its highest in the nation’s history. Remember what I am saying here…there has only been one chapter written the deal with frolceosure. It was during a growing economy. The stupidity of thinking that real estate would just continue to go up and up with NO end, was and still is just downright stupid. Everybody is still stuck on stupid here. Remember, value is a function of affordability. Nobody understands what value really means in real estate. And to top it all off, when you place value in the market place to a point that no one can afford the property…even the homeowner that just refinanced their home and cannot pay the monthly payment based on a fixed rate loan…to later lose it, because the rate just double. Hey…it’s not complicated. And the big eye opener is that the values are still declining. WOW…where did all that value go? The question is…was it there in the first place? NO…it was never there. Borrowers are beginning to realize that if they are making payments on a mortgage that is under water, every payment they make to the lender will get them nowhere. They are not building any equity because the principle balance is not going down and that they are just throwing their money down an endless well of no return.I’ve got a plan to resolve this mess. And it’s not a complex plan. We have to rewrite the workout policies, because the ones we are using today are not working and will never work and that is a message to the dumb investors who still think they are to get all of their money back in a down economy that they have lent to borrowers. That’s what capitalism is all about…you win some and you lose some. Remember investors, you can lose money too. However, the way that you are doing it, will continue to cause valuable equity to continue to be eroded and soon no one will be able to get any loans of any kind. The sad reality of this whole matter is…America is on the road to becoming a first class third world country because of greedy investors and the stupid conduct of the mortgage industry. Now that really makes me sad.