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P.O. Box 5707, Riverside, CA 92517
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Where have all the REOs gone?
By Giang Hoang-Burdette • Mar 31st, 2010 • Category: real estate newsflash
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The presence of real estate owned (REO) properties held by lenders and not yet on the market, known as the shadow inventory, is a constant reminder to those in the real estate business that the real estate market still has a way to go before it normalizes. To build a market and get out of this real estate limbo, REOs must first be resold to owner-occupants or income property investors, not speculators, even though the possible REO deluge will likely have an observable adverse effect on home prices.
However, with so many banks, investors, trusts and government-controlled entities holding REOs using different methods to report their foreclosed home holdings, it’s difficult to ferret out the exact number of REOs that remain to be placed on the market. This wildcard creates a quandary for brokers and agents looking forward to the day real estate prices finally stabilize then begin their annual upward rise — probably limited to the rate of inflation for the next few years into 2015.
What reports do exist indicate that REO inventory is rising as banks are beginning to foreclose on those homebuyers who are not eligible for loan modifications or who re-default after modification. So where are the REOs taken in by lenders on foreclosure, and how long will it take them to show up to the party?
first tuesday take: The “missing REO” phenomenon is a symptom of a bigger problem, and it’s not the destabilization of prices by putting the REOs on the market immediately after foreclosure. Here’s what the banks aren’t talking about when explaining the slow trickle of REOs onto the market: when they sell an REO, they must then for the first time report the loss (as all REOs currently are supporting an unreported loss) on the lender’s books. It doesn’t take a mathematician to figure out that these massive losses could topple the solvency of any bank that may be on shaky ground — and many of them, even the largest ones, are.
Thus, we probably won’t see a flood of REOs any time soon. Banks are biding their time, holding onto the REO losses and waiting for the economic recovery to see them out of their difficulty.
Re: “How Many Homes Do Banks Have Up Their Sleeves?” from the Wall Street Journal
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Copyright © 2012 by the first tuesday Journal Online - firsttuesdayjournal.com;
P.O. Box 5707, Riverside, CA 92517
Readers are encouraged to reproduce and/or distribute this article.
Copyright © 2012 by first tuesday Realty Publications, Inc. Readers are encouraged to reprint or distribute this information with credit given to the first tuesday Journal Online — P.O. Box 5707, Riverside, CA 92517.
Giang Hoang-Burdette is a licensed real estate agent and the first tuesday Journal Online editor. She is also lead editor for the Forming Real Estate Syndicates, Buying Homes in Foreclosure and Legal Aspects of Real Estate books.
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I love you guyes. I have been a reader for many years and I like your common sense approch to understanding ehe ever changing R. E. Laws.
I need your help once more. I have been licensed continously since 1978. Four years as an agent and the remaining years as a Broker. My understanding has always been I would not be required to take any more courses to renew my license. Can you help me find out if this is falose or true.
Thank you Rae N. Lunetta
00673437
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