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103: The number of months it would take to sell off all the foreclosed homes in banks' possession, plus all the homes likely to end up there over the next couple years, at the current rate of sales.
How much should we worry about a new leg down in the housing market? If the number of foreclosed homes piling up at banks is any indication, there's ample reason for concern.
As of March, banks had an inventory of about 1.1 million foreclosed homes, up 20% from a year earlier, according to estimates from LPS Applied Analytics. Another 4.8 million mortgage holders were at least 60 days behind on their payments or in the foreclosure process, meaning their homes were well on their way to the inventory pile. That “shadow inventory” was up 30% from a year earlier.
Based on the rate at which banks have been selling those foreclosed homes over the past few months, all that inventory, real and shadow, would take 103 months to unload. That's nearly nine years. Of course, banks could pick up the pace of sales, but the added supply of distressed homes would weigh heavily on prices — and thus boost their losses.
The government is understandably worried about the situation, and its Home Affordable Modification Program has made an impact by helping people stay in their homes and avoid foreclosure. As people who enter the program catch up on their payments, the number of homeowners 60 or more days delinquent has fallen 9% over the past two months.
Now, though, the effect of modifications could be on the wane. According to Goldman Sachs, HAMP started less than 80,000 trial modifications in March, less than half the number in the peak month of October 2009. At the same time, a growing number of modifications are being canceled as borrowers prove unable to pay. By Goldman's count, about 68,000 were canceled in March.
All this means that little can stop banks' inventory of distressed homes from growing. Too many people owe too much more on their homes than they can afford. For the housing market, that could mean a long-lasting hangover.
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The most obvious of manipulations of our economy to fix the highest possible prices for necessities like housing, food, gasoline, even automobiles, is accomplished via the stock market as it is used by the elite as a price fixingmechanism to charge the waning middle class prices for what they need at ever increasing personal sacrifice; they are targeted as the the only fatted cash cow that have anything left worth taking. It is a national disgrace that with the gigantic inventory of housing as indicated above that truly affordable housing without the risk of outsized debt is generally not available to even those who still have jobs, as the priority is to keep homebuilders building ever more homes and merchants of debt able to continue rolling over ever more unpayable debt for many customers. The tradition of “burning the mortgage” by middleclass homeowners who truly own they homes and celebrate the final payment of that debt as free and clear is almost unheard of nowadays. Responsible folks who don’t borrow-to-spend are viewed as “deadbeats” (that’s a true term in the credit card industry to descibe those who pay in full every month and never incur late fees, interest, and penalties) and are considered impediments to the ideology that the economy must move in an ever expanding mode like a fat person who must keep eating to keep putting on more weight.
This and most Friday afternoons, when Barrons publication is going to feature a stock with a market moving article, that stock will trade significantly more than usual volume in the after hours session and if its a positive mention the stock will trade way up and if its a negative mention the stock will trade way down. Yesterday tickers GES, RMBS and FISV all traded much more volume after hours session than normal and traded much higher in the case of GES and FISV and much lower in the case of RMBS which is right inline with their Barrons mentions today. I have complained about this in the past to the SEC as well as to Barrons and other media outlets. My complaining appeared to slow the frequency but it is still occurring regularly. This is not something that is hard to to back test and prove. Take notice for yourself. Every Saturday when Barrons puts out their publication check the time and sales of the stocks on Fridays after hours. Someone is getting the info of what will be mentioned and trading on it. I would wager half of my trading account that those trades week after week could be linked to the same person. Just look at all the stocks featured in Barrons weekly publication and look at the time in sales for those stocks the Friday after hours session prior to their being mentioned in Barrons. The really obvious part is that these stocks typically do NONE to very little volume after hours but on the Fridays before they are to be mentioned in Barrons they do a ton. Like RMBS yesterday someone is holding 50k shares on the offer down 2.5% That NEVER HAPPENS after hours without significant news. I have began documenting these occurrences as well as my complaints to Barrons and the SEC in case I need them in the future. This activity is stealing in my eyes and illegal. It needs to be stopped. Please file a complaint about this to the SEC via the link below. Any little bit we can do to stop insider trading will help. https://denebleo.sec.gov/tcr/add.action?c=3
It will be interesting to see if the dip that has occurred since January is driven by the rush of people trying to take advantage of the homebuyer tax credit that expires at the end of April. Do not be surprised to see the months supply of inventory trend up during the summer. This is typically a slow time of year for builders and resellers. The exisiting and new home sales data this week will unfortunately be viewed as a “head fake” in a few months. The housing situation has a long way to go before it truly recovers. Homebuilders stocks have gotten way ahead of themselves as well. They are not a good indicator of what is happening with housing.
@Spots,
Would you elaborate or provide links on why you say a rental home is not worth the investment?
People are broke!
Real Time Economics offers exclusive news, analysis and commentary on the economy, Federal Reserve policy and economics. The Wall Street Journal’s Phil Izzo and Sudeep Reddy are the lead writers, with contributions from other Journal reporters and editors. Send news items, comments and questions to realtimeeconomics@wsj.com.
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