Tsunami of Bank Owned Homes. Is it Real?

For about three years now, we in the real estate industry have been hearing there is tsunami of bank owned homes coming on the market. Earlier this year, REO agents I know, had asset managers telling them to "get their running shoes on" because there were a bunch of bank owned homes to be released. Well, bank owned assignments and listing have actually declined. So then the question becomes, "what about the shadow inventory?" The homes that are owned by the bank, but not on the market? Or even a bigger number, the homes that are in the foreclosure process that could turn into bank owned? I did some research in Rocklin to get my arms around the numbers and here's what I found out:

- There are 175 bank owned homes in Rocklin and 42 for sale or pending sale. That leaves 133
- There are 400 homes in pre-foreclosure and auction status and 215 for sale or pending sale. That leaves 185.
- So, there is 348 home of "shadow inventory" in Rocklin.
- Over the past six months, about 80 homes have sold per month. That means, if all 348 homes were placed on the market today, they would be absorbed in just over 4 months at the current rate. That is still technically a "seller's" market. Sis months or more supply is considered a "buyer's" market.
- One caveat pointed out by my friend in the commercial world, Ross Tolbert. These numbers do not include those that are behind in their payments but the bank has not started the foreclosure process, i.e., the shadow of the shadow.

So where is the tsunami? This graph below shows bank owned homes in Rocklin for sale and sold over the past five years.

This shows that clearly, the tsunami of bank owned homes hit in 2007 and 2008 in Rocklin. There was a little wave in 2010. Is the worst of it over then? Well, experts predict we will have short sales through 2014 to 2015. We will certainly still have foreclosures and bank owned homes released. However, if the current pace continues, it will not make a material impact on values. I checked these numbers about two years ago and there was 6 months supply, so things have actually improved.

Here's the thing, some of you need to move. Renters can buy and pay less than they are in rent. Every one's situation is unique, so don't listen to the media. Talk to real estate professional like me. We likely have the "real" story of what is going on. 916-213-4522. bob.walatka@kw.com