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TitleFAQ: U.S. - Why is foreclosure inventory greater than REO foreclosures?
AuthorAndres Carbacho-Burgos
Question

Why is foreclosure inventory greater than REO foreclosures?

Answer

REO (real estate owned) inventory is a subset of foreclosure inventory, and therefore has a smaller value.

As used in the RealtyTrac dataset, homes move through three stages:

  1. Pre-foreclosure: at minimum, a legal notice of foreclosure has been filed.
  2. Auction: a notice of foreclosure auction sale has been filed.
  3. REO: the auction failed (most likely because the bid price was too low) so the property is still owned by the bank, which will seek to dispose of it.

REO inventories are an important part of the Moody's Analytics house price forecast because REO sales to third parties usually involve a substantial discount from the original price.  Note that our RealtyTrac forecast collapses the "pre-foreclosure" and "auction" stages to a single measure.  For example:

XTRACFIM = XTRACFIPREM + XTRACFIAUCM + XTRACFIREOM
FXTRACFIM = FXTRACFIPROCM + FXTRACFIREOM

Collapsing the pre-foreclosure and auction forecasts into a single category is necessary because some states do not require the filing of a legal notice of foreclosure, so that their pre-foreclosure inventory is close to zero even when foreclosure activity is high.

Concept Description
Historical Forecast RealtyTrac Foreclosure Inventories, (#, NSA)
XTRACFIM FXTRACFIM Total
XTRACFIPREM FXTRACFIPROCM    Pre-foreclosure
XTRACFIAUCM    Auction
XTRACFIREOM FXTRACFIREOM    REO

The RealtyTrac monthly foreclosure activity historical dataset is an add-on product, separate from the U.S. National and Regional Database.  The Moody's Analytics RealtyTrac foreclosure forecast is also separate.  Please consult this product page and contact your sales representative for pricing information.



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RealtyTrac Foreclosures
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