From the New York Times:
NEW statistics provide a glum holiday-time snapshot of the real estate market: shrunken sales pace, bloated inventory and a “shadow inventory” of foreclosed homes looming menacingly in the background.
Right now, according to one report, New Jersey has the largest shadow inventory in the country: 41 months’ worth of homes to sell — and they aren’t even on the market yet.
The foreclosure process is complete on these nearly 98,000 homes; a National Association of Realtors committee made the state-by-state count. But the banks or other lenders have not yet released them for sale.
“Some are occupied, and in the eviction process,” said Bill Flagg of ERA Queen City Realty, a foreclosure sale specialist whose clients include Fannie Mae and Freddie Mac, the government-backed federal lenders. During the foreclosure process, he said, “the former owners were not pushed toward eviction while they were attempting a loan modification through a government program.” (One result is that some former homeowners have lived free of monthly payments for two years or more.)
Jeffrey G. Otteau, the market analyst who heads the Otteau Valuation Group in East Brunswick, also foresees a gusher of foreclosed properties, possibly even a “royal market mess” that may not dissipate for years. Mr. Otteau’s company issues monthly reports and sponsors seminars to brief real estate professionals on trends — at this time “mostly pretty brutal” trends, he said.
According to his most recent report, 67,800 houses on the market in October had remained unsold for a month or longer. That was 10 percent more than in October 2009; concurrently, there were 9 percent fewer sales than in 2009.
Mr. Otteau tied the downward motion directly to the loss of jobs in the state — an average 3,900 per month this year, while the country over all was adding 87,000 jobs monthly.
He performed his own calculation aimed at estimating the size of the foreclosure inventory that shadows the market’s future:
“In the first 10 months of 2010,” he said, “there were 9,318 completed foreclosures, which is only 0.41 percent of all homeowner households in the state.
“But there were a total of 51,119 mortgage delinquencies — the start of the foreclosure process. The difference between the two figures is 41,801 homes, which works out to be 1.83 percent of all owned homes.” Mr. Otteau said that not all of those houses would come on the market at one time. He also said the gap, as a percentage, was more than twice as big in California as in New Jersey. But California has a more dynamic economy, creating new jobs that will ultimately lead to more home purchases.
“In New Jersey,” he said, “if something does not happen to change the job situation, it is going to take a lot longer to burn off inventory backlog.”