Posted by: Timothy Ellis (The Tim)

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

24 responses to “Undocumented Shadow Inventory Scarce in King County”

  1. softwarengineer

    The Internet Data On the Scarce Inventory Actually Listed For Sale

    Compared to total count of all mortgaged homes [not for sale and for sale] is almost impossible to google, try it.

    My guess is it’s not much over 10% or so.

    That makes the foreclosed rate of 9% above HORRIFYING.

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  2. Blurtman

    LPS is a criminal enterprise. What next, data from Bernie Madoff? Get real, Tim.

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  3. boster

    Good post Tim but mostly a waste of time. The perma bears are like a doomsday cult who will preach the end is coming tomorrow for the rest of their lives.

    My neighbors house sold in a week with a horrid layout, massive need for updating, many minor and not so minor repairs needed and a few other defects. We’re definitely in a sellers market. As long as our national politics are in disarray rates are going to stay low and this will continue.

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  4. Blurtman

    RE: The Tim @ 4 – LPS has engaged in perjury, forgery, illegal kickback practices and has pleaded guilty to misleading investors. Quite the trustworthy outfit. Sand, meet Tim’s head. Tim’s head, sand.

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  5. softwarengineer

    RE: boster @ 3

    Means Very Little

    Any house sells fast, cheap.

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  6. mike

    RE: Blurtman @ 5 – Yep, it’s a big conspiracy that NOBODY, least of all Bill McBride (Calculated Risk) has noticed that LPS’s delinquency estimates are wildly unrealistic. Props for unraveling this mystery based on a largely unrelated lawsuit.

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  7. Erik

    Good analysis Tim. It seems like there are still a lot of delinquencies. I can see from your chart that there aren’t as many delinquencies as there once were, but they are still at an elevated level. This elevated number of delinquencies should continue to put downward pressure on the market, but you are right…. there doesn’t appear to be a big crash coming based on delinquencies. Thanks for the information.

    Also, I just noticed I can drag the graph onto my hard drive. I usually have to open it and save as pdf. Nice feature.

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  8. Mike

    RE: softwarengineer @ 1 – it’s comments like this that make me wonder if you’re not a software engineer at all but instead someone that works in the real estate industry and has a vested interest in obscuring what is really going on in the market.

    The first graph clearly shows foreclosures peaking around 4%, yet somehow, without explanation you assert that the real number is currently 9% “as shown above”. It’s this kind of blatant falsification that leads me to conclude 1) you’re stoned or 2) you are in the category of someone that can’t understand the problem because your paycheck depends on not understanding it. I’ll add that your new commenting style has me leaning a bit towards explanation 1.

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  9. Erik

    RE: Mike @ 10
    My guess would be drunk as opposed to stoned. He has stated he likes to drink. It would be hard to believe that is the case though at 7:18am.

    There are times when SWE made a comment on a calculation and was totally wrong which corndogs pointed out. How is he an engineer and cannot do simple calculations? I think the jury is still out on this one. Maybe his health isn’t so good?

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  10. Macro Investor

    By The Tim @ 4:

    RE: Blurtman @ 2 – Please explain how LPS’ involvement in illegal robo-signing has anything to do with their ability to accurately keep statistics on delinquencies. Or don’t.

    Let’s all cut out the name calling and try to be adults here.

    Tim, you have NO IDEA what data or assumptions were used to produce these charts. LPS is a loan servicing company. They would only know about THEIR OWN LOANS. We know many/most loans were packaged into securities and sold to investors, spread throughout the world. Where would data on those come from? We know from all the lawsuits, that in many cases it is impossible to even establish ownership. At best this data is from surveys of an incomplete universe. Challenging someone to refute it is like saying refute religion. It can’t be done.

    You do seem to have a confirmation bias. Months before you announced your own home purchase and employment by redfin, your attitude change to “bubble over, situation a-okay”. I assume you are an honest person, but in denial. Just like all the millions of honest folks who lost their savings in 2 stock market bubbles and a housing bubble. Once invested in a decision, it’s very hard to accept non supporting data.

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  11. Macro Investor

    By Erik @ 11:

    RE: Mike @ 10
    How is he an engineer and cannot do simple calculations? I think the jury is still out on this one. Maybe his health isn’t so good?

    Your own math and grammar skills have been shown to be incorrect on several occasions. I also recall how you bragged about having a masters degree, then more recently you were only working on a masters degree. Caught in your own lies.

    I think the jury is still out on whether or not you are even high school age yet.

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  12. mike

    RE: Macro Investor @ 12 – The thing is the LPS numbers are not wildly out of line with a number of other estimates. Likewise, none of the objective bloggers like Calculated Risk are calling them out. (And CR highly skeptical opf bad data – but he considers the LPS #’s to be reasonably accurate) Could they be wrong? Sure. But they’re also in line with dozens of other measures used to quantify the problem loan situation.

    For those of us that have been following the problem loan situation carefully for 7+ years, the big category to watch is loans that fall 90+ days delinquent but are not in foreclosure. That category makes up the majority of non-discharged bubble era ‘bad loans’ that have yet to go full cycle. Most of these are in some stage of modification, and most will probably result in a property sale at some point in the next 5 years. But, as Tim pointed out, the total volume is not enough to radically affect the housing supply – even in the highly improbable event that every single one of these houses hits the market in a short time interval. Even then, some neighborhoods won’t be affected at all due to current supply constraints.

    Finally, MOST of these house are occupied – so while a foreclosure will affect for sale inventory in the short term, it won’t create excess supply. Quite the opposite – when the occupants are forced out and the vacant house is put up for sale, supply of available housing units will shrink until someone actually moves in.

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  13. doug

    Blackrock and others for the first time in their history have loaded up on rental houses. A lot of these were foreclosures and shadow inventory. Qe is at 85 billion a month. The stock market is at all time highs. Massive distrust in the government and wall street. Labor participation rate at all time lows. Obamacare a total disaster and ripoff.

    The shadowy situation we are all in is of a much bigger concern than the shadow inventory that will again appear as stocks gold oil and real estate collapse.

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  14. Erik

    RE: Macro Investor @ 13
    I applied for graduation at UW and they said that I could earn an Master of Science in Engineering. I want a Master of Science in Mechanical Engineering. I need to make up 2 undergraduate prerequisites to earn the MSME. I thought maybe they would accept my application for MSME, but they did not. Still not MSME. I have a Bachelor of Science in Mechanical Engineering Technology from Central Washington University.

    Here are the requirements for MSE:

    Here are the requirements for MSME:

    I did not lie about my education because I did in fact apply for MSME and was denied. I have completed all the courses to earn an MSE. I hope to have my MSME by December, but we’ll see.

    Not that it really matters, but massive people on here were saying how dumb I was. I certainly don’t think that is the case. Inexperienced…. maybe.

    There are a lot of angry people on here that want to take me down because they are unsuccessful or not confident. You are one of them. My path is full of failures and successes. I just keep getting up and putting my boots back on and trying to accomplish more. If you had a success and put it on here, I would applaud you. You are not that person because you are either a loser or you feel like you are a loser.

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  15. Macro Investor

    RE: drshort @ 14

    @dr short, 14:

    “LPS gets mortgage data from not just from loans they service but also from around 65+% of the servicers in the market.”

    How do they GET THAT DATA? Most likely from surveys, which are notoriously inaccurate.

    “Just a little disclosure. I work for a major institution heavily involved in the mortgage market, so I have first hand knowledge of LPS and their data.”

    First hand knowlege is someone who works at LPS and actually collects/analyzes the data. You are merely a customer. Last on the food chain, and subject TO MARKETING AND ALL IT’S PROBLEMS.

    I find it amusing that you expect us to be impressed that you work in a some undisclosed major institution. As what — the CEO, or some janitor? C’mon, get serious, please. Bring data or stay home.

    @mike, 15:

    “The thing is the LPS numbers are not wildly out of line with a number of other estimates. Likewise, none of the objective bloggers like Calculated Risk are calling them out”

    Two problems with this. Other estimates are most likely using the same data source — so of course they would jive. Also, NO BLOGGER OR ANALYST should be assumed objective. The rule is EVERYONE TALKS THEIR BOOK.

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  16. Macro Investor

    By Macro Investor @ 12:

    Tim, you have NO IDEA what data or assumptions were used to produce these charts.

    Here is the 2×4 across the noggin that some of you need…

    “How can the for-sale inventory be relatively low while the vacancy rate is high? Because the share of vacant homes being held off the market – that is, neither for sale nor for rent – is rising. In 2013 Q3, 53.5% of vacant homes were held off market, up slightly from 52.9% in 2012 Q3 and from a low of 45% at the height of the housing bubble in 2006.

    …the for-sale inventory is back down to its 2000 level, and tight inventory has helped fuel sharp price increases across the country over the past two years.

    …53% of vacant homes were held off mkt in 3Q, highest share since before bubble

    …10.2% of all housing units are vacant, unchanged y/y”

    Macro speaking again — So, according to the census bureau and trulia, homes are being held off market and the restricted inventory has fueled rapid price increases.

    This data is restricted to vacant homes. Obviously if we could add non vacant, it would be higher.

    More about the LPS data… When you look at loan delinquency rates, WRITE OFFS ARE NOT INCLUDED. What that means is once a owner/servicer decides a loan is uncollectable, it is taken off the books and no longer reported. So folks living rent free may not be counted at all. Some may be sitting on the books of thousands of collection agencies. There is no way to know for sure.

    Remember, these loans were sold to investors across the world. Each one has a different reporting standard, and many have an incentive to hide their problem loans. Very hard to find/count.

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  17. Mike

    RE: Macro Investor @ 19 – not necessarily. The upper bound on problem loans is how many loans were issued during the bad times. Tens of millions of these loans have already been discharged in foreclosures and short sales, so the pool is a lot smaller than it was in 2008. Loan volume fell off a cliff around mid 2007 and stayed low from there out except for a few bumps as rates fell. Most of these post bubble loans- with a few exceptions- are performing normally, if not slightly better since marginal buyers were excluded from the market.

    The class of ‘discharged but not foreclosed’ loans should be fairly small because the only way that would make any sense is if the property has little or no value. Sure they exist, but in seattle a modest crap shack is worth the $100k of land it sits on even in Delridge or South Park. If you have examples of this, I’d like to see some. I’m not aware of any real life examples of this phenomenon outside of some well publicized ‘abandoned’ developments in remote desert areas of California, Nevada, etc…

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  18. Awaken the Bear

    The real shadow is deflation.

    It will come as a thief in the night. Leverage will topple and wages will be cut. Interest rates will rise, and home prices will fall. It will most likely lead to a decade of illiquidity.

    Look at the price of gas. If timber follows suit and rolls over again, building a new home will become the prominent option, especially with such low inventory.

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  19. Blurtman

    RE: mike @ 8 – Yes, I have asked McBride, an industry booster, to please at least place a caveat on any LPS data he references. You know, he was quite wrong about the labor force participation rate. Any bozo can run a blog. It does not impart a gift of infallibility.

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  20. Blurtman

    RE: The Tim @ 7 – Tim, you frequently deride NAR, an organization quite easy to lambast, but one that has committed no crimes. Why the double standard regarding LPS? Perhaps it would make your story telling that less credible if the data you utilize were referenced to derive from a criminal organization. All it takes for crime to continue is for citizens to continue to look the other way, after all.

    Would it not be appropriate to place an asertix next to any reference to the LPS data describing the past crimes of LPS, and perhaps a caution that an organization which has shown itself numerous times in the past to have looked at breaking the law as merely a cost of doing business should be wisely suspected of doing so again?

    By your standards, Tim, if Bernie Madoff began publishing investment data, then it should not be regarded with extreme suspicion, and should be referenced as God’s honest truth.

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