FOLLOWING on the discussion I had with a caller recently, here’s another topic you’re going to start hearing more about soon: shadow inventory.
Have you heard of Shadow inventory?
The shadow inventory is the inventory of homes that are probably going to be for sale real soon. For example, foreclosed homes that haven’t been listed are a part of shadow inventory. The exact definition of shadow inventory depends on who you ask. Someone might say, it only includes homes that have been taken over by the bank. Another might say, it could include any home that is more than 6 months late on a mortgage.
Does Shadow Inventory have an effect on Real Estate? Study done in 2010
Regardless of what you say, there’s a lot of shadow inventory. Estimates vary between 2 million and 8 million homes in the US. With sales expected to be 5.5 million this year, that’s a lot of inventory. The effects of such inventory will be to depress home prices. As soon as sales pick up, people and banks will list homes to try to sell them. This will depress prices as there will again be more sellers than buyers. It could take years before all the shadow inventory is sold off, which means prices will be lower than what they could be. See, I am not the only one preaching that to potential buyers.
I wish I could find the source, but I’ve seen it so many times, I know it to be legitimate. There are a lot of mortgages that are going to be reset in 2011. Imagine people with 5 years of locked in rates having their mortgages reset in 2011 because they bought at the peak of the bubble in 2006. Right now, these people can still afford their mortgages. But what will happen when rates reset? It’s already expected that interest rates will rise in 2011, so these people could be in trouble. Will these release a flurry more shadow inventory on the market? I hope not.
Let’s all hope people start to get jobs again throughout this year and can refinance these mortgages. Of course, the problems we are seeing in the Middle East need to go away and our exports although showing signs of recovery needs to hold its ground for the next few years.
CNBC reports that there are on average 48% of people who know someone in foreclosures. 1 out of every 4 home values underwater and 1 out of 4 homeowners believe that property value will continue to drop this year.
58% of west coast residence know someone in foreclosure or are in some kind of financial hardship. 24% of home values will continue to fall more this year.
We were all proud to have owned a home/s before and now we might be struggling to tell our friends that we might be losing those homes. I am very surprised because I have been friends with a couple of guys and just recently found out that they are in default of their mortgages and were ashamed to come to me for advice. I might be known as a silent salesperson, because sometimes I don’t want to pry into other people’s financials, unless I am asked or approached.
I strongly believe that we all need to face the music with verified knowledge, practicality and honestly especially to ourselves. Believe me, I still talk to very intelligent people not being able to grasp the fact that they are losing their houses and there is nothing anyone can do for them. Because it’s natural to hope, we rely on HOPE to help us, not fact and reality.
So, who comes to tend us? The foreclosure scammers, bottom feeders are now more aggressive than ever. I read in the paper last weekend a case of forensic auditing of lawyers suing banks or some kind of class-action lawsuit. Those are minuet cases that occurred a long time ago and it only happened to a very few and with that fact, some people are using that as a point of their advertisement.
The mortgage balance reduction program that is so popular a few years ago, that probably by far netted the most money for all of the loan modification scams, that turned out to be a major failure, too. Why do I write these columns for you? For you to realize and see clearly your truthful options, then make a long term decision about your property. I want you to all move on. Once everyone has moved on and dealt with problems, I believe our economy will start to recover. By then the job market should be stable and our market will run its course. Don’t you want that, the problem you are carrying on your shoulders now is dragging you and your entire community, even if I will do this one borrower at a time, I have done my duty.
From the Federal Trade Commission’s website (FTC)
Know your rights
The FTC’s MARS Rule gives you rights – and sets out requirements for people who sell mortgage assistance relief services:
You don’t have to pay any money until the company delivers the results you want. It’s illegal for a company to charge you a penny until:
1. It’s given you a written offer for a loan modification or other relief from your lender; and
2. You accept the offer. The company also must give you a document from your lender showing the changes to your loan if you decide to accept your lender’s offer. And the company must clearly tell you the total fee it will charge you for its services.
Companies must disclose key information. The rule requires companies to spell out important information in their advertisements and telemarketing calls, including that:
-They’re not associated with the government, and their services have not been approved by the government or your lender;
-Your lender may not agree to change your loan;
-If a company tells you to stop paying your mortgage, it also has to warn you that doing so could result in losing your home and damaging your credit.
-Companies can’t tell you to stop talking to your lender. You should always feel free to contact your lender directly to see whether they can offer you additional options. Companies that tell you otherwise are breaking the law.
If a company doesn’t follow these rules, it could be trying to scam you.
Some companies will ask for a “donation” in lieu of a fee that is flat out a scam, too. They are trying to wiggle out of the law and you know why?
Power to knowledge and facts, I guarantee you that the next article I will write about will be more positive news and I will try to find the light at the end of all our tunnels.
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Please call Ken Go of 1st Innovative Finance Group at (562)508-7048 or write to This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
(Advertising Supplement)
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