Background:

Banking Solution to Financial Crisis is to Ignore Distress Inventory

California had 1,200 Foreclosure Filings Per Day in 2009

The California Real Estate Foreclosure Machine: Countrywide Financial, WaMu, and Wells Fargo top Foreclosure List in Q4 of 2009.

Everyone is talking about "shadow REO inventory" when National Association of Realtors keeps telling people that, although REO sales dominate the market, the current inventory is very low and market is recovered or bottomed.  Some reports even said further that in California, there is only 3-4 month inventory that is much much lower than the normal condition of 5-6 months.  So there is a shortage for Californians. 

My Post in American Forum today as follows:

Dr. HB,

Your article is a very good article to the public. However, it is not good enough for me, some one who has been watching the situation very closely, to say "excellent." 

First, I believe, the American modern financial system is more well-organized and more sophisticated in handling real estate bubble than the De Beers or cartel in diamond industry handle production and manipulation in face of the bankruptcy crisis when the Africa huge diamond mines were surprisedly found. 

I have been working on distressed real estate market since 1991. The worst foreclosure happen in California was 1996 when the record showed about 64,000 cases in a quarter. Back then, housing dropped so quickly as a rocket. I bought a condo for $58,000 compared to $190,000 sold at the time as new construction built in 1991. Per your article, NOW is supposed to be more serious compared to the last decade.  But now look around, where can we see the BIG discount I enjoyed last decade in the same city and its surrounding areas.

About a year ago, a 1 bedroom 1 bathroom condo was listed for about $180,000, and now the similar condo in the same complex was listed yesterday for $319,000. A year ago, a similar single house was listed generally for $250-289.000. Now they ask for $340,000-389,000. In this area, almost everything is going up dramatically. Where is the area located? Go Check "Diamond Bar" for the condo.
http://www.redfin.com/CA/Diamond-Bar/23518-Silver-Spring-Ln-91765/home/8049580

Yesterday MNBC put a video "Home Prices on Shaky Ground?"out.  MNBC invited some experts like Truila's CEO Pete Flint expressing their opinions on the current real estate market. One thing they seem agreed upon is "low end real estate is stabilized." Yes, it seems very true from my observations on some Western cities. But look more deeply. It is not a true picture.

Why and how do I know that? I happened to present my offers to buy some those properties. I even had a chance to have my offer accepted and open an escrow. There are something bothered me so much. Could you be kind to look into some cases and tell me what is going on. For example, it seems some banks are not holding their REO inventory.  Instead they sold those properties to some groups, maybe it is called "whole sale," for a dire cheap price. I witnessed so many cases like bankers are doing its "short sale" to easily take advantages from our FED or AIG.  Look at how easy a banker has a break.  I feel so pitty to a home owner who has no such a luxury to get the same and has very difficult time with his lender. For example, one REO was foreclosed for $240,000 (countrywide loan made in 2006) and it was sold to "E" investment group through Chase for $17,000 in mid-2009. Are those bankers holding the bag and take a huge loss?

NO is my answer; but I don't want to speculate on the issue at this moment unless DHB can point out some lights for me.

All I can say is the whole system help banks and the only victim is American average taxpayer JOE.

p.s. To me, Wells Fargo is still a very honest banker who is doing more conventional way to get rid of its REO as opposed to other banking predators.