Much of the so-called Shadow Inventory is in the mortgage insurers "late stage" default inventory
When the banks are satisfied with market price of those real estate assets, they will began to harvest those properties. The homes will be sold and the delinquent inventory of the mortgage insurers will be cured at higher rates, some of those benefits are already showing up in their monthly reports.
Both Radian and MGIC's cure rates are rising even, at this time of year when normally they would be declining in October-December.
The shadow inventory of homes was estimated to be 2.3 million as of July 2012. 1 million was the serious delinquencies. However, the serious delinquency is declining almost monthly.and is falling at 8% annual rate as of September 30th.
I have tried to get a monthly estimates for shadow inventory but, it eludes me. Currently, forsale inventory of homes is the lowest since April 2006 so, I believe some of the shadow inventory is already on the market.
Watch the monthly delinquency reports for Radian and MGIC for abnormal cure activity and you be getting the investment advice that puts you ahead of the crowd.
Thanks Tommie for your tireless effort to educate the board regarding housing market and data. Whether it is correct or not I gave a you credit. "Very good Job"... I will give the excellent grade when I see everything you posted here bear fruits. Have a nice day. Don't forget MTG, that is my bread and honey for my retirement, lol
Tommiegun- No one is considering the inflection point once the "SALEABLE" 2.3 million portion is over and what you have left is plain garbage of a foreclosed asset. Many of this homes have been abandoned and have had kitchens absconded, HVAC ripped out, roofs leaking, windows broken, drywall rot, flooring isssues and on. Banks ask market prices less a small discount for this homes. They will not be getting it. In Florida, you can have a home once worth 150k whose value is now 75K and next to it will be what I just described. I have offered $5 grand for several of these disasters and the banks are plain stupid thinking someone will buy it for a slight discount only to be in the negative after dumping 45 grand back into it. SO my point is there will be alot of inventory that will be sold for 10 cents on the dollar or be razed. So there is a point where the numbers will hit a wall. When is the question..
Their was an analyst on Bloomberg last night saying that even if real estate prices rise only 5% the banks gain on their shadow inventory.
Radian has 31% of their late stage defaults are Alt-A, and 31% is A minus and below. He said if those assets rise 5% per year, the return to the bankers is greater because of the reserve that has been set up for those assets.
Bottom line everybody wins if those assets in stay in late stage delinquency appreciating in value and a sell is made after they appreciated.
Data for this is from Radian's quarterly statistics.