This expression is from a piece by Annaly Capital, a mortgage REIT. The point being made is that there are a ton of unsold homes out there and until those move through the system, the new housing market will not begin to revive. This chart shows the increases in problem properties at Fannie Mae, Freddie Mac and FHA, the troubled, government-owned mortgage giants.
When a mortgage company gets a home back through the foreclosure process, that’s an acquisition. If you hear the term REO, that refers to real estate owned by a mortgage holder or bank after the owner defaults on the mortgage. When Fannie or Freddie sells the property, that’s a disposition.
As you can see below, the blue columns (acquisitions) are moving up faster than the light gray columns (dispositions). Hence the black columns (inventory) keep going higher and higher. This inventory growth of unsold, unloved and unwanted homes is what Annaly Capital is referring to as the pig in the python.
This excerpt from a post on Pragmatic Capitalist, written by Annaly Capital, illustrates the meaning of their pig in a python analogy:
…This leads us into the negatives for the market:
* Excess supply of homes, especially vacant ones
* The multifamily market will begin to take share as more households decide to rent
* A large and growing shadow inventory is hanging over the market
Now we can begin to explain our title… the problem loans (the pig) that need to be moved through the long foreclosure and REO process (the python), so that the houses can be put out onto the market and absorbed…
All the king’s horse and all the king’s men can’t put the housing market back together again. It has to work through the unsold inventory and then — and only then — will it start moving forward.