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Foreclosures Cast Increasingly Long ‘Shadow Inventory’

Posted by Larry Doyle on December 17, 2009 5:52 PM |

I continue to reiterate that as long as mortgage delinquencies increase, we will experience a subsequent increase in foreclosures, in turn excessive housing supply, and a weak housing market.

This dynamic is not about to change anytime soon. We saw evidence of this today as one of the largest homebuilders, Hovnanian Enterprises, reported extremely weak earnings. The Wall Street Journal covers the Hovnanian story specifically and housing in general in this video clip.

Specifically on the foreclosure front, Bloomberg reports Shadow Inventory of U.S. Homes Climbs:

The number of homes that may be in the pipeline for a sale because of foreclosure and delinquency climbed about 55 percent to 1.7 million at the end of September, according to estimates by First American CoreLogic.

The “shadow inventory” rose from 1.1 million a year earlier. Such properties include those taken over by banks and mortgage companies and those where the loans are at least 90 days delinquent, the Santa Ana, California-based research firm said in a report today.

How long might it take for the excess housing supply and foreclosure problem to abate? Bloomberg offers:

the pending supply reveals there is still quite a bit of inventory that will impact the housing market for the next few years,” First American said.

Batten down the hatches.


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