One of the more remarkable methods used (even by “Intelligence Agencies”) to establish if something is true or not is to is to label it true if it came from a “reliable source”. Who said it? If he or she is considered reliable or an authority the data is considered true or factual. The other – perhaps even more silly – system in use is multiple report. If a report is is heard from several areas or people it is “true”. Five or ten people hear the same thing and pass it along, it becomes a “fact”.
I have been hearing about the Shadow Inventory for well over a year now. It is HUGE. It is sensational. A Big Giant Tsunami (BGT) of inventory is going to be unleashed by the lenders. Get ready. Like nothing you have ever seen. The housing market will be flooded with inventory like never before. No doubt it will change life as we now know it.
Only it is complete crap. Nothing but invented data dreamed up and endlessly passed along by organizations and individuals who heard it from someone else (I have not yet tracked the original source for this shadow inventory nonsense as it seems to emanate from “everywhere”). What is really interesting are all the “new facts” dreamed up by “industry observers” to make the Big Giant Tsunami theory still possible – in spite of the overwhelming abundance of easily observable data that would directly contradict the idea of the banks having this huge inventory that they are holding back to be released later.
I bet I have your attention now. Some of you may even be angry – you damn well KNOW there is a shadow inventory!!! So lets look over why I am publicly saying it isn’t true and what the thought process was for the people and organizations who have been saying (and continue to assert) it is true. These people would have no reason to intentionally forward false data. So what data did they look at to conclude there was a Big Giant Tsunami of inventory the banks have and aren’t releasing? Charts like this – graphically showing the Shadow Inventory are all over the the media and the internet.
So what system is being used by economists and others to calculate this shadow inventory? Simple, take the cumulative total foreclosures recorded (the big number) and subtract the current active and pending inventory in the MLS, plus the sold MLS properties (the little number) and the remaining number is “the shadow inventory”. Simple, quick and it requires NO LOOKING at anything – just grade school level math.
To be clear, I am NOT referring at all to any foreclosures yet to come. Inventory the banks may wind up getting in the future. I am only talking about NOW. It is no secret that REO agents are losing market share as they, as a group, have less and less inventory being given to them by their asset managers. These same asset mangers who – last year – kept telling them that they had a lot more coming in to give them. It just never arrived for them to give. The only REO agents I know who are doing better these days are those REO agents who deal in higher end homes. Those high end agents are getting inventory, lots of it. This is not to say that all across the country there is no REO inventory, there is – just less and less of it. The BGT crowd has invented the idea that the banks have the inventory but are keeping it until the prices go up!
How about a few facts that I know are true here in the Phoenix area – and I have every reason to believe are true right across the country (as I can think of NO reason for these facts to only be true here).
Fact: In my local MLS, there are about THREE TIMES as many bank owned homes listed in the MLS as the MLS actually shows. I know this because two guys who actually look counted them all. One by one.(Mike Orr of The Cromford Report and Tom Ruff of The Information Market) They counted them and compared the addresses shown in the MLS, one by one, with the County Assessor records. These are homes listed by banks who instructed the listing agent to NOT use the term “bank owned” in the listing.
Tom Ruff and Mike Orr spent months going over every deed transfer in Maricopa County (Looking at each foreclosure going to the bank and tracking that house for its current ownership and they could directly account for all but about 5,000 houses) and established that for the Greater Phoenix Area THERE IS NO SHADOW INVENTORY.
Fact: Major banks often off load huge portfolios of inventory to hedge funds. Huge portfolios. Anyone or any organization who is claiming that they are “tracking” what the banks are doing who does not have sufficient access to track those portfolio sales is simply engaging in the simple grade school math referenced five paragraphs above.
No doubt there will be some readers who remain convinced that what they have read about and then co-created must be true. That’s okay. If you are happy believing that a Big Giant Tsunami is coming – enjoy the wait. However, I’m betting you remain completely dry.
Article originally published January 26, 2010.
CC Licensed image courtesy of zen via Flickr.com.
Is the real estate industry endorsing Carson’s nomination to HUD?
(BUSINESS NEWS) Ben Carson’s initial appointment to HUD was controversial given his lack of experience in housing, but what is the pulse now?
NAR strongly backs Dr. Carson’s nomination
When President-Elect Donald Trump put forth Dr. Ben Carson’s name as the nominee for Secretary of Housing and Urban Development, NAR President William E. Brown said, “While we’ve made great strides in recent years, far more can be done to put the dream of homeownership in reach for more Americans.”
At the time of nomination, the National Association of Realtors (the largest trade organization in the nation) offered a positive tone regarding Dr. Carson and said the industry looks forward to working with him. But does that hold true today?
The confirmation hearings yesterday were far less controversial than one would expect, especially in light of how many initially reacted to his nomination. Given his lack of experience in housing, questions seemed to often center around protecting the LGBT community and veterans, both of which he pledged to support.
In fact, Dr. Carson said the Fair Housing Act is “one of the best pieces of legislation we’ve ever had in this country,” promising to issue a “world-class plan” for housing upon his confirmation…
Job openings hit 14-year high, signaling economic improvement
The volume of job openings is improving, but not across all industries. The overall economy is improving, but not evenly across all career paths.
Job openings hit a high point
To understand the overall business climate, the U.S. Labor Department studies employment, today releasing data specific to job vacancies. According to the department’s Job Openings and Labor Turnover Survey (JOLT) for April, job openings rose to 5.38 million, the highest seen since December 2000, and a significant jump from March’s 5.11 million vacancies. Although a lagging indicator, it shows strength in the labor market.
The Labor Department reports that the number of hires in April fell to 5 million, which indicates a weak point in the strong report, and although the volume remains near recent highs, this indicates a talent gap and highlights the number of people who have left the labor market and given up on looking for a job.
Good news, bad news, depending on your profession
That said, another recent Department report notes that employers added 221,000 jobs in April and 280,000 in May, but the additions are not evenly spread across industries. Construction jobs rose in April, but dipped in professional and business services, hospitality, trade, and transportation utilities. In other words, white collar jobs are down, blue collar jobs are up, which is good or bad news depending on your profession.
Additionally, the volume of people quitting their jobs was 2.7 million in April compared to the seven-year high of 2.8 million in March. Economists follow this number as a metric for gauging employee confidence in finding their next job.
If you’re in the market for a job, there are an increasing number of openings, so your chance of getting hired is improving, but there is a caveat – not all industries are enjoying improvement.
If you’re hiring talent, you’ll still get endless resumes, but there appears to be a growing talent gap for non-labor jobs, so you’re not alone in struggling to find the right candidate.
Economists suspect the jobs market will continue to improve as a whole, but this data does not pertain to every industry.
Gas prices are down, so are gas taxes about to go up?
Do low gas prices mean higher gas taxes are on the way? Budgeting for 2015 just got a bit more complicated, if some politicians have their way.
Gas taxes and your bottom line
Many industries rely heavily on time in their vehicle, not just truck drivers and delivery trucks. Sales professionals hop in their vehicles throughout the day, as do many other types of professionals (service providers like plumbers, and so forth). For that reason, gas prices and taxes are a relevant line item that must be budgeted for 2015, but with politicians making the rounds to push for higher gas taxes, budgeting becomes more complicated.
Gas prices are down roughly 50 cents per gallon compared to a year ago, which some analysts say have contributed to more money in consumers’ pockets. Some believe that this will improve holiday sales, but others believe the timing is just right to increase federal taxes on gas. The current tax on gas is 18.40 cents per gallon, and on diesel are 24.40 cents per gallon.
Supporters and opponents are polar opposites
Supporters argue as follows: gas prices are low, so it won’t hurt to increase federal gas taxes, in fact, those funds must go toward improving our infrastructure, which in the long run, saves Americans money because smoother roads mean better gas mileage and less congestion.
Gas taxes have long been a polarizing concept, and despite lowered gas prices, the controversial nature of the taxes have not diminished.
While some are pushing for complete abolition of federal gas taxes, others, like former Pennsylvania Governor, Ed Rendell (D) tell CNBC, “Say that cost the average driver $130 a year. They would get a return on that investment” in safer roads and increased quality of life, he added.
The Washington Post‘s Chris Mooney points out that federal gas taxes have been “stuck” at 18 cents for over 20 years, last raised when gas was barely a dollar a gallon and that the tax must increase not only to improve the infrastructure, but to “green” our behavior, and help our nation find tax reform compromise.
Is a gas tax politically plausible?
Mooney writes, “So, this is not an argument that a gas tax raise is politically plausible — any more than a economically efficient tax on carbon would be. It’s merely a suggestion that — ignoring politics — it might be a pretty good idea.”
Rendell noted, “The World Economic Forum, 10 years ago, rated us the best infrastructure in the world,” adding that we “need to do something for our infrastructure, not in a one or two year period, but over a decade.”
Others would note that this rating has not crumbled in just a few years, that despite many bridges and roads in need of repair, our infrastructure is still superior to even the most civilized nations.
Regardless of the reasons, most believe that Congress won’t touch this issue with a ten-foot pole, especially leading up to another Presidential campaign season starting next year.
“I think it’s too toxic and continues to be too toxic,” Steve LaTourette (the former Republican congressman best known for his close friendship with his fellow Ohioan, Speaker John Boehner) tells The Atlantic. “I see no political will to get this done.”
Whether the time is fortuitous or not, and regardless of the positive side effects, many point to a fear of voters’ retaliation against any politician siding with a gas hike, so this matter going any further than the proposal stage is unlikely.
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