Tuesday, May 27, 2008

Countrywide vs MLS

As promised, I have completed a comparison of Countrywide REO listings with the MLS. As I previously discussed last week:

Last year, I posted a comparison of REO listed for sale on Countrywide's web site with the MLS. Now that foreclosures are dominating the real estate story, the shadow inventory meme is catching fire. (Both Mr. Mortgage and Mike Morgan have recent commentaries on the topic.)

At this point, it is very difficult to piece together a complete picture of this shadow inventory, but the preliminary examinations I've been able to make seem to reconfirm the conclusion I drew last year: the banks have far more inventory on their books than they are actively marketing.
This is now confirmed as far as Countrywide is concerned:

For May 17th and May 25th, only 55% of the REO listed on the Countrywide site was listed in the MLS as well. Keep in mind, this is not an indictment of Countrywide, it's an indictment of the NAR. The MLS is simply not giving us the entire inventory picture any longer.


DrDoom said...


This post is an example of why MLS inventory correlation to price is not the whole story. If there is a shadow inventory that is large then there is another variable (parameter) beyound MLS inevntory.

A parameter is not a cause, it is simply a measurement. To determine cause you generally need a well developed model of the system and even then you need to be careful.

In your example of getting the boys up in the morning the local noise level may itself not be the "cause". For example the cause may be you want to be sure there are productive citizens in the future to pay your medicare. However, the noise level is a great indicator (parameter). When it goes quiet - watch out! Something has changed.

I may have my statistics wrong but if two parameters both have a 66% correlation to a result under a linear fit then the two paraments are not linearly independent.

I should probably shut up on the inventory thing but I just don't feel it has been explored as it should be. There is some low hanging fruit.

Anonymous said...

It's way overpriced (the countrywide reo asking price)...who would buy that even at a discount? These homes will rott. Hmm...maybe the stupid knife catcher will pay 50k above asking price and suffer for 30 years to eventually sell the home for the same price as purchased 30 years ago.

... said...

DD - thanks for spelln' my name right!

I'm not saying they're independent, but both reacting to the same problem..

Max - are we talking about 120 unlisted units? or 1200 or 12000?

MLS inventory contains only Realtor listed properties with a few exceptions. Most builder inventory is not included, even though many are Realtors. Most FSBO's are not included without some effort and fee paid. THere is really no comprehensive "listing service" out there.

But, for comparison purposes, its pretty consistent to compare numbers MOM or YOY using its database.

Lets say CW is representative of the industry, but did 10% of the bad loans, so the number is 10x120=1200 = almost 10% of the current inventory situation. Significant, but likely foreclosures in process or something else. They'd be smart to actually hold inventory and feed the market at a real absorption rate (as most of you'all complained the builders didn't) to keep from re flooding the market. Are they that smart???

Deflationary Jane said...

Actually I'd agree with you Sippin except that I'm getting REOs trickling back onto my old searches. I'm talking homes that went PS as long ago as last Nov have reappeared and the county records show no recent sale. Why would Metrolist show something pending for 4 months then the listing dissappears then 3 months later it's back on the MLS? It makes you think they closed but not recording the price then Voila! ... it's back.

I don't think there is any single answer to what I've seen. I think it's more indicative of how messed up the system is currently. I was sceptical about how significant the volume of shadow inventory could be but looks like I was wrong.

Oh and the Victorian we were looking at last winter? It's pending at 130k. Last sale price was 365k. Now that is a haircut.

Max said...

But, for comparison purposes, its pretty consistent to compare numbers MOM or YOY using its database.

I don't know if that's true. The banks now control a huge amount of inventory, so it makes sense that they wouldn't want to pay a premium to list in the MLS when they could make their own market.

The point of this exercise is to test that theory, and so far it seems to be playing out. 300-400 houses isn't a lot in terms of overall MLS inventory, but when only 1500-2000 houses per month are selling, you could easily control the margin with that number.

Rich said...

Further to what DJ was saying- I'm seeing an unusually high number of PS in the MLS. I haven't been tracking specific numbers, but it just seems that these days every other listing, or more, is a 'PS'. I have my doubts, and suspect some shenanigans to get us potential buyers to think everything is being gobbled up.

Anonymous said...

The differance in inventory levels can be the dead time from when the home is pulled off the market and sits in the banks data base while they figure how to recoup through multi (revenue) streaming from a single property. You'd be amazed how banks are doing this..