There's a lot of talk on the blogosphere about "phantom Inventory". That's the new name for homes banks have taken back but are sitting on. For some unknown reason they are holding homes and not listing them as soon as they foreclose. There's much speculation as to why they are doing this. The most logical to me is that they don't want to flood the market with REO properties. This would drive the prices down even faster than the 5% per month they are currently dropping. But on the flip side if a bank holds a home for 6 months they probably have lost 15% to 20% of what they could have got by selling right away.
Case in point,
514 Wrightwood Rd, Corona. This is a former model home. It was built in 1997. It sold new for $220K when the development built out in late 97. It sold again right at the peak in Sept 2006 for $580k. The bank took the home back in Jan 2008 for $496k. Even back in Jan there is little chance they could have sold this for the balance of $496k. But they probably could have gotten close. A house just a few doors up the street sold in March for $395k. Another sold in June for $350K. And yet the banks still did not put this home on the market. I've been driving past this house for nearly a year wondering when they would list it. Well, wonder no more. It hit the market this week. Listing price, $262,500. At that price this should attract some attention. Especially from the guys that just paid $350k 4 months ago..... I'm sure this will get bid up unless it's thrashed inside. But I'm also quite certain it will not get bid up $88k to make the June buyer feel better.
The question remains though. Why did the bank wait? If they had put this home on the market back in Jan, when they took it back they probably could have gotten close to $400k for it. Now they will be lucky to get over $300k.
6 comments:
Could be that the banks are overwhelmed, too busy--having hard time keeping track of all of these houses. It doesn't make sense to wait and lose.
I have been looking at property that is foreclosed on but has not hit the market. It is taking a while to hit the market.
This is very common. The banks are too busy lining up vacation seminars at pricey resorts for their CEO's to be bothered with petty things like this.
Golfer x
I would like to post my personal experience, if you don't mind. We got an offer accepted at the beginning of Sept, great deal, everything went smoothly. Clean REO, our offer was accepted at 330 and we were packed and ready. Sept 30 we were scheduled to sign docs to close, we get an email from escrow stating that the property was taken off the banks inventory list. To our surprise this house was a Lehman Bros.property, which went under 11 days ago. According to our escrow company nothing can be done, they had 45 escrows fall yesterday due to the same issue. If I might add or contract states closing date of 10/17/08, apparently these houses had to close prior to 9/30. We are bumed as heck, what is happening to this market?
PS stressed
I've seen this a lot lately - what really annoys me is when the Realtor puts the sign up even though the bank hasn't listed it yet. I saw one house with a sign for two months before the bank finally gave him a price and listed it.
I'm also at a loss for why they would wait so long.
I think I know why they wait so long. They have a stack of a couple hundred homes coming back and they hired two employees at $12 an hour to help dispose of these homes.
Also, the longer it takes the more the government might give them in the future.
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