The tentative housing recovery might be a mirage. Let me pull back the curtain and show you why the financial industry may be manipulating real estate data.
For the last few months of 2012, foreclosure activity has steadily decreased nationwide, according to monthly reports from RealtyTrac. But even with this slowdown in foreclosure activity, it appears there is still a bottleneck between when a property is foreclosed and when it’s listed for sale. Let’s take a look at a few markets to illustrate how this plays out.
RealtyTrac documents 6,635 bank-owned REOs in Phoenix. If we compare RealTrac’s REO data with Realtor.com’s residential listings a glaring statistic stands out. Realtor.com, the official website of the National Association of Realtors, lists only 3,782 re-sale properties in Phoenix, including single-family homes, condos, townhouses and bank-owned REOs. Most of Multiple Listing Service properties cited on Realtor.com are non-distressed sales. So where are the nearly 6,600 bank-owned REO properties that should be “for sale” in Phoenix?
If we look at Nevada, an even bigger shadow inventory emerges, where the banks are seemingly withholding inventory. RealtyTrac shows 8,793 bank-owned homes in Las Vegas, while Realtor.com only shows 1,515 active listings (both re-sale and REO inventory). Where’s the nearly 9,000 bank-owned REOs cited by RealtyTrac?
And consider Orlando, Fla. RealtyTrac illustrates 6,902 bank-owned REOs properties are on the bank’s balance sheets in Orlando, while Realtor.com only shows 3,160 re-sale listings. Why aren’t Orlando’s REOs listed for sale?
Now, there could be some sensible reasons why the banks aren’t listing their REOs, including lack of staff, inexperienced personnel, fraudulent paperwork or other explanations why the distressed inventory isn’t showing up in MLS data nationwide.
But given the recent revelations of the industry’s dubious robo-signing scandal, a good dose of skepticism is in order.
Across the nation several real estate agents have told me that supply is shrinking and prices rising. But is this shrinking inventory real or manufactured by the big banks? If inventory is being distorted in the three markets stated above, what’s going on in other hard-hit foreclosure states?
This shadow foreclosure inventory will eventually make its way to the market, but buyers — and the media — need to understand what is actually happening in the marketplace, whether it is deliberate or not.
Readers what do you think? Are the banks deliberately withholding REO properties to manipulate the housing market? Or is something else going on?
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