We’ve got houses– lots and lots of houses. Some are part of the National Association of Realtors “official” inventory, but many are not. In fact, there could be another year’s worth of inventory hiding out there: [Thanks L!]
A supply of 1.8 million homes either owned by banks or poised for foreclosure potentially hangs over the nation’s real estate market, according to data released Wednesday.
This “shadow inventory” of residential real estate — property that is in foreclosure, has a loan 90 days past due or has been taken back by a lender and is not yet listed for sale — stood at a nine-month supply at the end of January, according to Santa Ana research firm CoreLogic.
That was a decline from an estimated 2 million units in January 2010. However, because the sales pace remains so weak and prices are on the decline again, a large shadow supply could affect the market for the foreseeable future, holding back any recovery.
Additionally, CoreLogic estimates that there are nearly 2 million homes with loans that are more than 50% “underwater,” with the home worth less than half what the property is worth. These homes are likely to fall into foreclosure in the near future, according to the firm.
“While the trend of the shadow inventory is improving somewhat, the current level and distressed months’ supply remain very high,” Mark Fleming, chief economist for CoreLogic, said in a statement. “The short-term weakness in prices and longer-term weakness in the drivers that affect the housing market imply that excess supply will remain high for an extended period of time.
So how much “official” inventory is out there?
Total housing inventory at the end of February rose 3.5 percent to 3.49 million existing homes available for sale, which represents an 8.6-month supply at the current sales pace, up from a 7.5-month supply in January.
While such a move on the part of the banks would be highly unlikely, imagine what would happen if all of that inventory were added to the market all at once. That potential additional 3.8 M homes could add almost another year’s worth of homes on the market. The current situation is not a lot better however. Lenders are trickling their inventory out on the market, which will keep the supply on the high side for some time to come. How long is this process likely to take? At this rate, clearly more than a year.
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Hey Twist, great post. Here’s another “layer” of the shadow inventory … how about homes that have been offered for sale in the recent past, but failed to sell (and are not currently back on the market). In my town of Tallahassee, FL, we have over 6,000 of them (and last year our total home sales was 3,000). Of course, some of these homes are already counted among the distressed properties, but many are just sellers who want to move but are unable/unwilling to lower their asking price to one which will get the home sold.
Joe-
Absolutely. “Cancellations” and “expireds” on the MLS are clearly part of the shadow inventory. Then there’s those folks who haven’t even bothered to list their homes, feeling they can wait for awhile.
There is no way there will be any sort of “V” shaped recovery. There are just too many forces that will keep things down for a long time.