There’s always something to howl about

Don’t you love reading all that good news about the the Phoenix real estate market’s recovery? Guess what? You’re being lied to — as always.

This is what’s really happening: FannieMae and FreddieMac are holding foreclosed houses off the market, in anticipation of “selling” them to campaign donors.

Meanwhile, the town is being picked clean, with prices being bid up by buyers convinced that houses are going out of style — a story we’ve heard before, yes?

As an example, my BargainBot search, which is shared with hundreds of investors all over the world, is at less than 5% of it’s peak. A search I use to select premium rental homes produces one listing this morning, where it stood at 45 homes in April of 2011.

If Fannie and Freddie “sell” the homes they own to politically-connected “investors,” the rental market in Phoenix will be slaughtered.

And if they release the homes they have been hoarding into the MLS, Phoenix will hit a third bottom before the market can finally recover.

You can call the news media idiots or you can call them liars. But any news from any official source about Phoenix real estate is dangerously misleading.


43 Comments so far

  1. Timothy Theiss March 21st, 2012 8:38 am

    I agree with you Greg, but a lot of Realtors need this false sense of recovery just to have the motivation to get of bed in the morning. And those same Realtors seem to have to no issue with leading their investor clients down that same path, not too unlike 2005-2006, except prices really are quite attractive now. The bidding war on homes that I have listed are requiring me to insist on Appraisal waiver for those buyer’s getting a loan. A rare breed for me but not all purchases are cash now.

    I know of REO real estate agent/teams who are starving for transactions now, another proof of shadow inventory.

  2. Greg Swann March 22nd, 2012 6:14 am

    > I know of REO real estate agent/teams who are starving for transactions now, another proof of shadow inventory.

    I started to see the demand-side shortage in April of last year, which is why I noted the numbers from then. We can track that Fannie/Freddie withholding starting in July of 2011, a huge drop-off in the number of homes released into the MLS. If you look at what they’ve dribbled out since then, it’s clear they’re cherry-picking.

  3. Jim Klein March 21st, 2012 9:02 am

    I don’t know Phoenix and I’m no expert in RE, but I knew this. Basically, if their lips are moving, they’re lying.

    I could write an extended macro-economic essay on why this is happening–in two words, no production–but that’s too boring. I can also report from Ground Zero that it’s 2007 all over again, but even worse…and of course for all the same reasons, basically. It took a while, but finally literal hunger is starting to appear.

    The only difference will be that when the serious “easing” comes this summer, everyone will FEEL like they’re winning, even as the hunger will become more pervasive. Sorta relates to a recent topic here, eh?

  4. Jeff Brown March 21st, 2012 9:51 am

    I’ve been sayin’ Phoenix’s inventory decrease is a mirage for several weeks now. A reader of my writings on the subject asked me what I thought of investing in Phoenix.

    Don’t — at least not now. I predict the new media phrase that might emerge, down the road, could be ‘inventory management’. It’ll be attributed to in-house emails/memos from lenders. I can’t be convinced, at least so far, that Phoenix is immune to their share of the 4-6 million homes still in or about to be sucked into the foreclosure pipeline.

    As always, time will tell. Good stuff, Greg.

  5. Greg Swann March 22nd, 2012 6:30 am

    > Don’t — at least not now.

    For what it’s worth, cap rates on Phoenix rental homes, even at these higher prices, are still very good. Even if rents soften substantially, there is still a lot of meat on the bone, and, as Jim notes, high interest rates will create many interesting exit strategies for house-rich investors. Hyperinflation is no fun for anyone, but it will be even less fun for if your investments exist only in the imagination of some Wharton MBA.

    The squeeze on rents will come from the bottom up, starting with multi-family. This is where all of the bottom-feeder single-family investors are finding their tenants — in the apartment communities. My kind of higher-brow landlords are living on newly-manumitted short-sellers, the functional definition of deck chairs on the Titanic, de facto cram-downs all around.

  6. Jim Klein March 21st, 2012 1:25 pm

    “Don’t — at least not now.”

    Risky advice IMO, Jeff. It’s thoroughly sensible, since what could be more powerful than supply and demand? In that context, like in a normal world, this is sage advice for the reasons you mention.

    The thing is, in this world, supply and demand are no longer the most powerful forces. Virtually every asset class has been /controlled/ relatively rangebound since November at least, and when they break out, they’ll break out big. Which way and when, rests a lot on the powers that be, and who can figure them out? Devaluation looks nearly certain, but deflation can cause a lot of pain too; it’s hard to say which sort of suffering will get the nod.

    It’s safe to predict that the REAL value of RE will be flat or lower in the near term IMO, but of course it’s usually denominated in dollars, which is problematic. Plus, eventually the washout will be over; how many families can squeeze into each house? The one sure thing is that interest rates will be going up–probably way up–over time, and that’ll wreak havoc with the timing of this stuff for investors.

    Hey, it might’ve been a couple years since you wrote your classic “inflation/deflation” post, and even THAT hasn’t been resolved yet! I guess my only point is that it’s risky business trying to micro-time decisions when a bunch of a**holes are pulling the strings. If there’s ever been a time when wise decisions should be motivated by individual values and not wide market signals, this is it. But then, as I’m sure Greg would affirm, every time is that.

  7. Jeff Brown March 21st, 2012 2:03 pm

    Hey Jim — I’m confused a bit by your wording. (I’m old and slow.) Are you saying the advice to hold off from investing in Phoenix now is bad advice?

  8. Jim Klein March 21st, 2012 5:34 pm

    Not bad, just unknown in the short term. I love this stuff, so I’ll rip off an essay; this happens to be a critical juncture anyway.

    It’s taking everything Govco’s got to keep the interest rates down, and supposedly till 2014 yet. They’re in a very serious pickle right now. Contrary to public perceptions of the huge money sitting around to invest, equity funds (the main retail route) are at super-low levels, roughly like they were in 2007. So it’s like everything here in Michigan…no buyers. Meanwhile, that 2-3 trillion sitting in corps. is starting to be paid out as dividends, buybacks, etc. IOW there’s nothing better to do with it…”no production.”

    Meanwhile, Goldman Sachs calls this the equity buying opportunity of a generation and the equity markets have been steadily rising, but are still what I would call “rangebound.” Nearly every other asset class is rangebound period, which is why the VIX is at such extremely low levels compared to the last few years. Plus, before the last two days, bullish sentiment was at historic highs, around 68% I think, which is one of the best contrarian indicators around. That alone would virtually guarantee a bear market in the near future, normally.

    But here’s the upshot. None of that matters any more. I say the VIX (a very important hedge for big players) is where it is ultimately because it’s presumed that the powers that be (TPTB) will do whatever it takes to keep everything rangebound and appearing as steady as possible. They probably will, and the only way to do that is to throw money at it. That is, “ease” or devalue, regardless of the particular method.

    That’s all they /can/ do, and that’s what they’ve been doing for several years now. Supposedly they kicked the habit, but unless they go off the wagon everything crashes—equity markets start falling like 5% a month or more, gold goes way below 1500, commodities crash and labor becomes even less wanted than it is now. Treasuries would do great for a minute as yields go to 1% or something, but that can’t last too long either as all the bills don’t get paid and we do the Greece Plan, but with no backer and only the austerity. This is no secret any longer and is why NO plan will work long-term.

    Now like I said, you never know what assholes are going to do, so they could go that route, the ever-feared “deflationary spiral.” It would make for a very cooperative populace in some ways–the food lines would be probably be orderly. OTOH, if they just print away and do what they’re used to doing, everyone FEELS good for a while as the cash and the projects and the assistance come flowing freely, during an election year yet. Given their sort of “compassion,” I’m strongly inclined to think they’ll opt for that tack, and that there will be whispers of it mighty soon. As we know, even whispers move the markets; in a controlled economy, that’s the only thing that can.

    But then, as soon as they do that and the equity, commodity and RE markets start to move favorably, whammo…there go the interest rates through the roof. The only way to stop that would be to speak in quadrillions of further easing, and nobody will be ready for that until next year at the earliest.

    So from the imbeciles POV, it’s either “lose, lose” or “win, lose.” I’m guessin’ they’ll go with “win, lose,” but that’s far from certain. If they do, though, then leveraged RE investing looks awfully wise right now…anywhere.

    I know that doesn’t answer your direct question about Phoenix RE, but the point is that these are extraordinary times for any sort of investor. I hardly need to tell you how RE investing is a careful balance of many factors—macro-economic, financial, demographic and others—and I’m just saying that the only ones who can make a really good guess are those who can physically hear the whispering.

    We’re already so far gone that even the word “market” is archaic. In the short run, there’s only one relevant indicator—how are TPTB investing their money? In the long run, not a soul on Earth knows the specifics of how this will end, except that whatever the assholes do can’t possibly work. Ask Ron Paul; logic ALWAYS holds.

    So that leaves a bunch of unanswered questions in the short run, and that’s all I was really saying. Sorry I said it so verbosely.

  9. Jeff Brown March 21st, 2012 5:41 pm

    Well put, Jim. There is another scenario. But it ain’t happening in this election. We need a new and improved Reagan/Volker double team. 🙂

  10. Jim Klein March 21st, 2012 5:56 pm

    Too late for that; sorry. Remember all that talk about the “tipping point”? We’re so far past that, it ain’t funny. Quite the opposite.

    Anyway, I saw this right after I posted that comment…

  11. Elizabeth Evans March 22nd, 2012 5:05 am

    I’m a long time Phoenix investor, and I an NOT buying anything else right now. Once again, supply and demand are not in balance. The investor herd has overrun the market because prices are so “cheap,” forcing owner-occupants to bid up prices to get a place to live. Meanwhile, rents are dropping again, especially in the newer and less expensive areas such as Avondale, Tolleson and Goodyear.

    I don’t know how much “shadow inventory” there really is and neither do any of you. If anyone really knew for sure, we would all agree on the number. As nominal prices go up and if interest rates stabilize, there will be less of it. The job market in Phoenix is improving, lenders are easing up, and a lot of folks with short sales and foreclosures are finding ways to buy houses. Most underwater folks I know that are still in their houses have found a way to hunker down and wait things out, mostly with some kind of accommodation from their lender.

    Is there inventory management, aka manipulation? You bet there is. My view is the bankers and the government, despite all the political manipulations and bureaucratic stupidity, are finally getting control of the situation. The wealth transfer that will occur because of the insider bulk sales will be disruptive to the rental market, but will have little to no effect on the sales market, except to further restrict retail supply.

    The elephant in the room is interest rates. As long as Bernanke et al can print and borrow, interest rates should stay relatively low. What will happen in the future, who knows? But heck, if I can buy or refinance today so my payment is comfortably low, maybe I just don’t care. And that’s what’s driving the market now, the buyer who will bid up because they want or need the house and can afford it.

  12. Greg Swann March 22nd, 2012 6:36 am

    An excellent analysis all around.

    > the buyer who will bid up because they want or need the house and can afford it.

    That’s another factor, buyers of getaway and future retirement homes. The latter can turn into medium-term rentals. The former essentially transfer vacancy from the lender to a private owner. Given that we are 5% overbuilt and population-growth is flat, the real challenge for fundamental growth on Phoenix is absorbing that surplus inventory.

  13. Jim Klein March 22nd, 2012 7:54 am

    Very sensible, Elizabeth; I’m quite worried that’s the problem with it. The only error IMO is that they’re not getting control of it, but rather losing control. FWIW this is the third day in a row that the markets are perfectly confirming my analysis above.

    It’s simple, and we’ll know soon. Either they do nothing and “investment” becomes an archaic word too, else they print and everyone gets to have 6 months of fun. Me, I just made the wisest investment of all–30 bucks worth of seeds.

    Greg, I think that’s a heckuva point about future retirement homes and medium-term rentals; great niche IMO. I’ve been trying to convince a friend of the wisdom of precisely that. Too bad wisdom doesn’t play so well these days.

  14. Greg Swann March 22nd, 2012 8:45 am

    > I think that’s a heckuva point about future retirement homes and medium-term rentals

    About five percent of the rental homes we manage fit that profile. Another 15% are owned in anticipation of selling by land contract when interest rates soar. The rest are buy-and-hold, but some kind of owner-financing should be a viable option when it’s time for the landlords to move on.

  15. Elizabeth Evans March 22nd, 2012 8:26 am


    Vacancy in a privately owned property isn’t “effective vacancy” unless the property is on the sale or rental market. How many Sun City condos are vacant 9 or 10 months out of the year with absolutely no effect on the Sun City condo sale and rental markets?

    This minute, I cannot agree with your 5 percent overbuilt estimate. New product absorption argues against being overbuilt. Builders are selling out their inventory and raising prices again. Beazer and Woodside are two builders that have recently raised base and spec prices, at least at the lower end. Check some of the listings of spec homes and the history. Lots of “price change” (price increases) in those listings. Hang out at a model home in a popular community on a weekend afternoon. Not like 2005, but lots of traffic, including buyers sitting in offices writing contracts.

    Population growth is less relevant when investors are gobbling up multiple properties and vacation and retirement buyers are returning. The investors will be very disappointed when the rosy rent and vacancy projections turn out not to be correct. That grim realization, however, is probably at least a year away.

  16. Greg Swann March 22nd, 2012 9:23 am

    > Vacancy in a privately owned property isn’t “effective vacancy” unless the property is on the sale or rental market.

    All I am saying is that empty = empty. Empty-but-privately-owned is absorption, I agree. But any vacant home that is financed but not producing income is at risk of foreclosure if the securities markets tank. Many, many second-home buyers would never have owned a getaway home absent this Federal fiasco in Phoenix. It won’t take much to get them to cut and run.

    > This minute, I cannot agree with your 5 percent overbuilt estimate.

    Been to Maryvale lately? Opportunity percolates upward, as we see with the huge vacancy rates in C and D-quality multi-family properties.

    > That grim realization, however, is probably at least a year away.

    Been to El Mirage lately? I have turned dozens of investors away because they wanted to buy nothing but the cheapest piece of shit in the worst stucco-and-tile neighborhoods. Those wannabe landlords are now losing their asses, and they will form the third wave of investor foreclosures. We don’t have enough beds for the bedrooms, and that means tenants can move up in quality without paying more in rent.

    I agree that rich people from out of state are more than willing to overpay for turnkey homes; it’s an on-going issue in my life, since, even now, bought-distressed-and-rehabbed-after-closing is much cheaper — albeit only for buyers with enough cash-in-hand to pay the rehab costs. But the excess inventory in the Valley, subtracting the homes Fannie and Freddie are hoarding, is the stuff nobody wants right now. Those homes will have to be fixed up and occupied (by in-migration) or torn down before the real estate market in Phoenix can recover.

    I can give you a quick lens for estimating the imputed vacancy rate in any area: How is the landscaping being maintained? One subdivision can be shaggy from management neglect. But if most of the subdivisions are infested with weeds — as with San Tan Valley, for example — the actual vacancy rate, MLS-listed or not, is huge.

  17. George March 22nd, 2012 1:57 pm

    no offence guys, but as an experienced Real Estate investor (in Europe), I am very hesitant to invest in US at any point over the next 3-5 years, regardless of all the rumors. And I think there are many people like me out there – and for a very good reason

  18. Jim Klein March 22nd, 2012 6:17 pm

    Can’t blame you, George. I’d be wary of investing on Earth.

  19. Elizabeth Evans March 22nd, 2012 7:04 pm

    Is the Phoenix market overbuilt with Class C and D apartments in bad neighborhoods, professional office space in outlying areas, poorly located and outdated retail anchor spaces, and cheap condo conversions? Yes to all of the above. Is it overbuilt with single fanily homes with decent schools and reasonable proximity to employment? Current absorption rates and inventory levels say otherwise.

    As low-end employment comes back, the low end apartments and El Mirage houses will as well. The $850 rental house in El Mirage will have to drop to $750 or maybe $650 temporarily to compete with low priced rentals in better areas, but as service workers and construction laborers filter back in, the product will be absorbed. A lot of those El Mirage investors you reference were cash buyers, and they can afford to wait. Or, they can sell what they bought dirt cheap in the high $40,000’s to the mid $70,000’s for somewhere in the mid $60,000’s to the high $90,000’s. The buyer might be the greater investor fool, or maybe an owner occupant priced out of better areas.

    The Class C and D apartments will likely stabilize at 10 to 20 percent effective vacancy, as turnover in that segment of the market is always high. Knowledgeable investors in this product factor high vacancy and turnover costs into the purchase. Occupancy in this product is highly cyclical, and occupancy is the always the first to drop and the last to recover in times of economic stress. Vacancy in these properties says little about whether the overall housing market is overbuilt.

    The product with which you and most of your readers are concerned, the bread and butter single family residence, is the stuff everyone wants, and I see no evidence that product is overbuilt. Check the prices instead of the (now disappearing) weeds in San Tan Valley and see if you don’t agree.

  20. Greg Swann March 23rd, 2012 6:45 am

    I agree with Jim that this is a very thorough analysis. But we’re back where we started: A backward-looking evaluation of the past year in Phoenix real estate, deploying traditional real estate fundamentals, would suggest that our market is recovering. But our market is a Federal real estate fiefdom, and the appreciation we are seeing is driven not by increased demand — though this is present — but by artificially-restricted supply. If Fannie and Freddie release the homes they are hoarding in bulk to “investors,” the rental market will be crushed. And if they release them individually into the MLS, resale prices will collapse for the third time. We saw this exact same “recovery,” including the mindless cheerleading by the Republic, at the end of the tax-credit-marathon, which preceded the second collapse in resale prices.

    Here’s the good news about fake markets, if people reading this want some good news: If a fake market goes on long enough, people start to believe in it. Buyers believe right now, obviously, but it looks like short-sellers are starting to buy into this “recovery,” also. This will result in a short-term increase in supply, which will hold down price growth — for now. When the music stops, they’ll all be screwed, but at least we won’t swing too violently upward before the price trend reverses.

    The Phoenix real estate market will recover in three years — the three years after the cessation of all these Federal market manipulations.

  21. Greg Swann March 23rd, 2012 7:04 am

    This chart

    shows month-by-month releases of lender-owned homes into the MLS from January 2010 to January 2012. This is our Market-Basket search, a subset of the market at large, but that search looks at precisely those bread-and-butter homes that matter most to us: Single-story stucco-and-tile 3-bedroom homes built since 1998. We can’t isolate reliably by owner in an MLS search, but the missing sellers are FannieMae and FreddieMac. They’re hoarding houses, and the artificial shortage they have created is what accounts for the current alleged “recovery.”

  22. Jim Klein March 23rd, 2012 4:46 am

    I gotta tell you, Elizabeth. I must’ve read your comments a dozen times, and I think they’re a terrific analysis. Intricate and accurate, and so eloquent too…my kind of reading, for sure. I think Greg’s got some insight on the fundamentals, as not-effectively vacancies become effectively vacancies; there are lots of things that could cause that.

    Also, I’d caution you about the premise that coming easing, should it happen, necessarily implies low interest rates, which I know is important to you. I don’t think that’s right, the last 5 years notwithstanding. It’s too early for a ramble, so I’ll save it. I just wanted to let you know that I love analysis, and that was one heapin’ helpin’!

  23. Jeff Brown March 23rd, 2012 6:36 am

    Hey Jim — Take it from me. Elizabeth is indeed, the real thing.

  24. Jim Klein March 23rd, 2012 7:45 am

    As usual, I think you struck at the core. Nearly every drop of the economy is one sort of fiefdom or another. This is what I meant when I wrote privately that we may have hit bottom. In the wide scene, there’s just nothing left to squeeze, except maybe food and I’m sure they’ll get around to that.

    But instead of coming off the bottom, there’s nothing to do but wait until people want to live again and the imbeciles manage to kill themselves off. Till then, there’s nowhere for unconsumed wealth to go but switch between asset classes and just change a bunch of numbers. Until REAL production returns, this is the long seventh-inning stretch of one lousy ballgame.

  25. Chris Matthews March 23rd, 2012 9:31 am

    I agree, giant step backwards. Over here in Austin things have been ramping up exponentially. I’m seeing multiple offers on every priced-well-product in a good location. I believe this being an election year has really given many buyer’s the confidence that the market is only going to get better because we have an opportunity to “change” things with a new president. I don’t want any of this Fannie Mae, Freddie Mac, politcal investor nonsense messing with my Kool-aid.

  26. Melanie McNeary March 23rd, 2012 9:36 am

    Glad to see you are calling them out on this, Greg. I think we’ve all experienced how flooded the real estate media has gotten with this type of “news.” I feel sorry for those who are buying into this- Phoenix needs to face the music and find a new recovery mode because living in denial won’t cut it.

  27. Elizabeth Evans March 23rd, 2012 11:00 am

    Fannie and Freddie have around 200,000 properties in their collective inventory. I can’t immediately find how many are in Arizona, so I will make a generous guesstimate. According to a March 1 article on Housing Wire, at the end of 2011 more than 23 percent of the Fannie Mae inventory was in California and the state with the second highest Fannie Mae inventory was Florida at 11.5 percent. There is no way the Arizona inventory could approach that of these two states, but let’s assume a worst case scenario of 8 percent of the GSE inventory situated in Arizona, or 16,000 properties. Some of these properties are located in other parts of Arizona, but let’s assume 75 percent of them, or 12,000 are located in the Greater Phoenix market.

    Some of these properties are not fit for occupancy, have residual title issues, or are otherwise unsaleable. Knock off 10 percent as unsaleable, and you are left with 10,800 properties. Not even the most efficient private sector company could do the paperwork amd fix up necessary to get 10,800 properties on the market at once, so let’s give the GSE’s a year to process and list all 10,800 properties in their existing inventory. That’s, ummmm, 900 properties a month.

    As of this morning, there are around 9,300 single family homes in Maricopa County and 11,400 in the entire MLS system listed as active. Even if 75 percent of the 900 monthly new listings by the GSE’s, or 675, are single family residences, they aren’t exactly going to dilute the inventory or significantly impact the imbalance of supply and demand.

    Last year, Fannie took back around 200,000 homes. I can’t quickly find how many Freddie acquired, but let’s assume these highly efficient agencies could process and sell another 200,000 properties in the same year. That means another 675 single family houses for a total of 1,350 a month that will go on the market. Dilutive? A little, but in an improving economy, I’m pretty sure these properties would be absorbed without a huge impact on price.

    If this guesstimate is anywhere near accurate, it proves how unnecessary the bulk sale program is in Arizona. The existing and pipeline inventory could be absorbed with minimum impact on or disruption of the market. This process is called an orderly liquidation. Orderly liquidation realizes the highest price for assets of an entity that must liquidate, exactly what the GSE’s need to accomplish.

  28. Greg Swann March 23rd, 2012 11:28 am

    Frankly, I hope you’re right. From where I stand now, it would seem you have any number of good reasons for insisting that it’s not raining. Must be my fault that I’m getting soaked like this. Meanwhile: Why aren’t you buying? If we’ve really turned the corner, leveraged appreciation will be worth a lot of money, going forward.

  29. Jim Klein March 23rd, 2012 2:29 pm

    That’s one part I thought Elizabeth answered well…that prices are being driven by faulty impressions and not the actual supply-and-demand status.

    The thing is, when production is stifled out of a society, nothing’s left EXCEPT impressions!

  30. Greg Swann March 23rd, 2012 2:33 pm

    Related link:’s Anthony Randazzo says No, This Is Not a Housing Recovery. All real estate is local, but Phoenix is more screwed up than most markets.

  31. Jim Klein March 23rd, 2012 8:47 pm

    Yeahbut he ignores the New Axiom: “Nothing makes sense.”

    There are demographic trends that could make his case even better. But still, I doubt housing will trail to hit the trendline this time around, which is the main point of his thesis. Basically, what else will there be? Personally I think vehicles and equipment are a good bet, but that’s relatively minor compared to RE and other asset classes. Other than commodities, which themselves will be under economic pressure, I don’t see how anything will have the favor that RE will have, assuming now is the starting point. Especially, ahem, in rural areas. I mean, how much ammo can one person hold?

    Sometimes justice prevails. The rewards this time will be to those who can spot REAL value and see through the bullshit in which it’s denominated. Next to food and water, shelter’s as basic as you can get. Plus, an environment of dizziness bodes well for the Dawgs, I think. Maybe tweet it.

  32. Greg Swann March 24th, 2012 11:24 am

    > Yeahbut he ignores the New Axiom: “Nothing makes sense.”

    Seen in a listing this morning: “All offers will be presented to the seller on Tuesday at 5 pm.”

    This is the way everyone was doing things in late 2005. We would list on Thursday to maximize the weekend traffic. We would do a net sheet on each offer as it came in, then plug the key values into a spreadsheet for apples-to-apples comparison. By Tuesday we might have twenty offers. Three of them would be worth looking at, per the spreadsheet. The rest were not even considered. We would meet with the client, sign the contract most likely to be the best deal overall and open escrow.

    Absent a natural catastrophe, a market cannot be this far out of balance without a lot of thuggery.

  33. Jim Klein March 24th, 2012 2:54 pm

    I’m guessin’ those buyers are handicapping about 98% likelihood of devaluation (inflation). I wouldn’t care to fade that action, but I don’t think it’s that certain at all. If they’re gonna do it, we should hear whispers within days, else it loses its whole function, using “function” loosely.

    The funny thing is that even if those buyers are right, they’re wrong. It’s a classic confusion between price and value, or money and wealth. It’s gonna take a genuine math whiz to figure it all out.

  34. Jim Klein March 24th, 2012 3:04 pm

    Also, Elizabeth makes a good case that the pure thuggery isn’t causing things to be /this/ far out of whack. It’s bad that you’re stuck in the middle of it, but it’s good because I think it’s showing what “value” really means. It seems that customers are wild to buy this, while refusing to buy that, with no classic market distinction between this and that, prices considered.

    I bet it would make David Friedman dizzy. It’s the thing I always believed he didn’t see.

  35. Greg Swann March 24th, 2012 4:12 pm

    Thoughtless people run in herds. The activity is being driven by the perceived activity: Nothing draws a crowd like a crowd. This is why the release of the homes being hoarded would made a big difference, by taking away the fear that, if I don’t buy at once, everything will be gone. This is what drove the frenzy at the end of 2005, too.

  36. Scott March 24th, 2012 3:47 pm

    Well here’s an idea, the lenders/Fannie Mae/Freddie Mac have such a glut of properties on their books they get the govt. to assist in lowering interest rates and buyers buy the already depressed prices & they begin releasing properties in a measured way to maximize their profits or minimize their losses? Timed with moderate interest rate increases does this stimulate the buyers into thinking “I need to buy before rates go up further?”

    If the inventory of this “ghost inventory” were public might we as citizen “investors” in these quasi govt. departments rally to force our elected officials to do something real? Would they do it? I doubt it on all parts.

  37. Jim Klein March 24th, 2012 8:39 pm

    Scott, governments are in the business of taxing and spending. Maximizing profits and minimizing losses work against that. That’s why they don’t happen.

    Every once in a while, dumb luck gives them something that does. Generally, they’ll load that division with bureaucracy or waste until it doesn’t.

  38. Scott March 24th, 2012 8:47 pm

    But who pays the huge lobby firms and contribute to campaigns? Certainly not us little fish.

  39. Jim Klein March 25th, 2012 12:58 pm

    Good thing too, else we’d feel even worse about ourselves!

  40. Nick Gioia March 26th, 2012 9:11 am

    I know for a fact that Fannie Mae and Freddie Mac are not releasing inventory in Baltimore, MD. We have been sitting on product that is ready to go for months. The only slowdown is Fannie Mae will not release it for sale for some reason. I have talked to other Foreclosure agents in Baltimore and we are all in agreement that the Foreclosure market has slowed down, not because of the number of Foreclosure has leveled off but because the banks are not releasing their inventory. Furthermore, I have been getting several assets pulled from our off market inventory only to find out that there have been sold re-package with 20+ other homes and sold to some investment group in TX or NY.
    So in effect, what you are saying makes a lot of sense to me and would be a logical reason for the reduced “on market” foreclosure inventory.

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  42. bryan March 27th, 2012 11:32 pm

    Greg, are you arguing that the Fannie/Freddie hoarding is primarily foreclosed houses that are being stockpiled, or that the foreclosure (Trustee Sale) process is just not being pushed forward as readily? I guess both lender-owned houses and houses where lenders have slowed the repo process would be factors, but which is dominant in the Phoenix area? I always lean towards a presumption of shadow inventory when I see a street with several non-foreclosed but still severely underwater houses (based on county records), especially in outer suburbs.

  43. Greg Swann March 28th, 2012 10:24 am

    > I always lean towards a presumption of shadow inventory

    I have no opinion about the idea of the shadow inventory, since it’s not something I can measure. I do agree that there are many obviously vacant homes in the Valley, but I don’t know why most of them are vacant or where they stand, if anywhere, in the foreclosure pipeline.

    All I am talking about is a deliberate, measurable hoarding of choice single-family fully-foreclosed homes by FannieMae and FreddieMac starting in July of 2011, as measured by new MLS listings of foreclosed homes. Taking account that the two GSEs have said that they plan to sell some of their inventory in bulk in Phoenix and other cities, it seems plausible to me that the homes missing from the MLS and the homes to be sold to well-connected “investors” are in fact the same homes.

    If anyone can dispute this with facts, I’m eager to hear them. Take note that if you work for the Arizona Republic or Arizona State University, I already don’t trust anything you have to say about residential real estate.