Monday, August 17, 2009

Trickle or a Flood?

With all the chatter about shadow inventory, I thought it might be helpful to look at some local numbers.

According to the number of REOs on the market in EDH is 47, and about half of those are pending sale. Folsom has about 43, with many pending sale as well.

According to, EDH has 96 total REOs, and Folsom has 85. This means about half the REOs are actually listed in the MLS, leaving a theoretical shadow inventory of one out of every two bank owned homes.

Below are some historical inventory levels of single family homes (does not include pending) gathered from, as well as the current number of NODs.

El Dorado Hills Inventory of Single Family Homes
2007 - 507
2008 - 433
2009 - 366
Current NODS - 267

Folsom Inventory of Single Family Homes
2007 - 400
2008 - 266
2009 - 292
Current NODS - 298

To sum, inventory is down almost 30%, from 2007. Total REOs are down 17% for EDH, and 26% for Folsom from last year, however NODs are way way up. NODs are 33% above their level last year at this time for Folsom, and a whopping 54% above for EDH.


husmanen said...

I foresee a trickle. If you were a bank exec and had the power to make a change, why would you?

The trickle method seems to work and there is no incentive to do otherwise.

Pretending the NODs you have don't exist until they are sold at auction is a great strategy.

Plus you have the bonus of not issuing a NOD for as long as you want. From what I gather TARP funds cover the Loan Servicer until it is absolutely impossible to conceive a potential payment.

That means TARP money is supporting the banks actions. Those that bought the real estate backed investments through CDO, etc are not going to complain.

Can't see anything but a trickle.

mikegbeeman said...

I wonder if the data you've compiled includes homes that are already scheduled for auction. If you look at, it seems there might be another chunck of homes that fit into that category. It's hard to tell though as the data doesn't exactly match?

sacramentia said...

From what I gather TARP funds cover the Loan Servicer until it is absolutely impossible to conceive a potential payment

This is you have a source?

husmanen said...

It might be here;

I'll have to do some more poking around tomorrow if I have time.

husmanen said...

Patrick Pulatie, from, taken from Mr. Mortgages site:

“…The loan mods are being done, after the calculation of Net Present Value, regarding what brings more money for the investors, as dictated by the Pooling and Servicing Agreements. Whatever is most profitable for the investor, is what is done.

The PSA covers the guidelines for mods and reductions. Most do not even give reductions any consideration. If there is no mention in the PSA of reductions, then reductions are not an option.

Most people do not even realize the purpose for TARP money. The majority of the TARP money is going to the Master Servicers of these bad loans. The reason is that for every missed payment by a borrower, the Master Servicer must “advance” the missed payments to the investor to keep up the income stream. The advances can only stop when it becomes a point of realization that the borrower will never be able to make up the payments, and foreclosure is the only option. Then the NOD is filed, the Master Servicer stops making advances, and once the home is foreclosed upon, the Master Servicer can sell the home and recoup the advances, leaving the Junior Tranche holders holding worthless bonds…”

husmanen said...

I found other references on the Web but cannot locate them right now.

sacramentia said...


Thanks..the short sale mystery is finally starting to make sense to me. The market is very disjointed right now. Which is good because disjointed markets create opportunities.

radiophilejapan said...

I'll be moving to the Sac area by the end of the year, and after reading a bit on the real estate inventory status, including this excellent gathering of data by AB, I decided to rent for a year or so while waiting to see what happens to the prices.

RV6Flyer said...

radiophilejapan, I would always recommend somebody rent for a period of time when moving to an area; no matter what the market is like. When my wife and I sold our house in Folsom to move closer to downtown Sacramento, we ended up renting in three of our target neighborhoods (lots of moving and cursed this plan during each move). This ended up being the best strategy we could have possibly made. It turns out we really couldn't stand Land Park/Curtis Park, which was our top choice, and had we purchased, we would be stuck there for a long time. Point being, even though we had lived in the area a long time and thought we knew the nuances of each area, we didn't and the only way to really figure it out was to rent and experience it firsthand.

lamaiahoffmann said...

RV6Flyer- Why did you hate Land Park/Curtis Park? What do you like about East Sac better? My husband and I are considering these 3 areas also.

radiophilejapan said...

Sensible advice. And thanks for sharing your experience. I may be renting in Folsom or Roseville.

RV6Flyer said...

Hello lamaiahoffmann

We mostly did not like Land Park and Curtis Park due to crime and general lack of amenities.
This was especially true in Curtis Park. We rented an amazing tudor on E Curtis Dr for half of what a mortgage would have been--why would we ever move?

The more superficial reasons were not having nice coffee houses, restaurants and grocery stores within a mile walking distance. We went into the Ghetto Market on Sutterville and Franklin a few times and you could feel the collective stares and disdain for the boujie white dinks in THEIR store. To get decent eat/drink/goods required riding a bike or driving. Land Park was slightly better in this regard, but we still found ourselves spending most of our time in East Sac and Midtown.

Crime -- this was the biggie. Burglarized twice in Curtis Park. Neighbors who have lived in the area a long time said that was normal and just park of living there. CP is a stones throw away from Oak Park and LP is bordering the projects on one side and has crime from South Sac creeping up from the other. Other random acts of crime were our Christmas decorations being stolen while out of town. My car was broken into. TONS of traffic. Police cars driving by with lights and sirens every other night.

So mostly it was a general lack of community and neighborhood. Land Park was better in we never had any break-ins or other crime, though we still felt like we were not part of a tight-knit neighborhood.

Now in the heart of East Sac, in less than ten minutes we can walk to a dozen good restaurants, half a dozen coffee houses, a variety of pubs and bars, and 5 gorcery stores (Corti Bros, Compton's Market, Natural Foods Co-op, Savemart, Safeway and soon Good Eats).
East Sac people love their neighborhood, sometimes a little too much, but the citizens really work hard to make it a great place to live. They are very organized--see our association website

A long-winded answer, but this is our experience and feelings. It really depends on what you want. Land Park for prestige and isolation, or East Sac for enjoying where you live.