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From the monthly archives:

November 2010

Shadow Inventory not a problem in 95032

by Gail Thomson on November 23, 2010

in Blog

We hear a lot of talk these days about the effect of shadow inventory (also known as pending supply) on the housing market. Statistically a large percentage of American homes in distress (in default on their loan payments) will eventually be foreclosed upon or go through a short sale. A recent report suggests that the combination of current market properties and this “shadow” inventory adds up to a worrying 20+ months of supply in some areas of the country which obviously creates concern about further downward pressure on prices.

What does this mean for our local 95032 market? Do we have a pending supply just waiting to flood the market and depress prices here?

Currently in 95032 there are 123 properties active on the MLS. Records also show that there are 75 “distressed” properties in the same area. Of those distressed properties some of them are already listed on the market or in contract to sell leaving about 60 not actively on the market. The question we need to ask is how many of those are likely to end up on the market as REOs or short sales? Looking at foreclosure outcomes over the last 12 months give us an insight into that.

Los Gatos 95032 Outcomes

In 95032 40% of all pending foreclosures since Oct 09 ended up reverting to bank ownership or being sold to a 3rd party at the trustee sale. The remaining 60% of foreclosures over the last 12 months were cancelled, meaning the owners either worked out a loan modification with the bank, brought the loan current or sold the home and paid off the loan. If we assume the same cancellation and foreclosure rate going forward we can expect 24 of the 60 currently distressed homes to become REO listings over the medium to long term. Of the remaining 36 foreclosures that are likely to be cancelled we can expect some to hit the market as regular sales or short sales. If we assume 50% try to sell that’s 18 additional market listings. So, of the 75 distressed properties that we currently know about we can expect about 42 of them to come to market at some point over the next few months. However, bear in mind that these will not all come to market at once and are likely to come available over a several month period. Also, given that current inventory levels reflect seasonally normal sales plus the previously released shadow inventory it’s quite likely that this new shadow inventory is coming available at a rate that can be absorbed without pushing the inventory levels even higher. i.e. the 123 inventory level is already elevated sufficiently to take into account the shadow inventory.

So what does that mean, well my impression is that 95032 does not have a potential shadow inventory market crisis looming and prices won’t be adversely affected to any great extent by the local shadow inventory that currently exists here. Other areas may not be so lucky.


Do you “like” this house?

by Gail Thomson on November 15, 2010

in Blog

I read a blog post today (entitled “Selling House Porn to Gen X and Y” but that’s another story) and it got me thinking about how different generations of buyers approach the purchase of a new home.

Think about the Boomers who grew up without the internet and, generally, with a defined job role. If they needed to get their finances in order, they called an accountant. If they were worried about their insurance coverage, they called their insurance rep; if they wanted to buy a house they called a Realtor. They put their trust in an expert to accomplish their goals.

Move on to their children, Gen X, the empowered generation who grew up believing they could be and do anything. They were immersed in the evolution of the internet and all things PC. When they think of doing their finances they install Quicken or MSMoney. If they’re looking for new insurance options they comparison shop on the internet. When they start looking for a house they sign up on Redfin and read blog articles about home loans, escrow and “10 ways to ensure success in your short sale purchase”. In short, if it’s not on a website, it doesn’t exist or is suspect at least.

Then there’s Gen Y, the “don’t touch that unless it’s been sanitized” generation. They’re growing up with Smartphones, Facebook and an “instant gratification” environment. They want information now in 3 different languages and summarized 6 different ways; isn’t there an app for that? When they’re worried about their finances they’ll take a quick glance at their Droid which is consolidating all their financial info for them behind the scenes and presenting it in the format they most desire. If they need insurance, they’ll plug in their requirements and choose between the 3 closest matches. When they want to buy a house, they’ll expect the perfect match to “ping” them when it comes on the market, set up an appointment to view, suggest home loan options, advice on purchase price and then guide them there by GPS. Oh and by the way, they’ll want their friends to “like” it before they’re comfortable it’s a good buy.

As listing agents if we’re not catering to all 3 generations then we’re doing a disservice to our sellers. When a home is listed we need to make sure it’s presented at its best for all three. That means ensuring it’s well publicized in agent circles in a form they can easily send to their clients; it means widely distributing professional and meaningful pictures and information on all the major buyer websites (as well as the smaller boutique sites) and making it easy for those buyers to come by without an agent; and it means making comprehensive information about the home instantly and easily available in mobile format when a buyer just happens to drive by.

I wonder what Gen Z will bring? Home purchase in your sleep?