Will the 'shadow inventory' last 3 months or 3 years?

One of the big unanswered questions that will determine how long it will take for the housing market to recover is how many homes will eventually go into foreclosure and be resold by lenders.

• Is the buyers market a mirage?

The more homes headed for foreclosure — and eventual distress sales — the longer it will take for the market to get back to normal.

But estimates of how many homes remain in the shadow inventory — not listed for sale but likely to be for sale at some time in the future — are all over the map. Analysts have put the number anywhere from 1.6 million to 15.3 million.

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"A lot of people don’t understand how much inventory is set to come online in the next 18 to 24 months," Jack McCabe, CEO of McCabe Research & Consulting in Florida, told The Miami Herald. "When you compare what the Realtors show is inventory to what’s out there, you realize we have a long way to go."

The Herald created a "heat map" of shadow inventory nationwide. Based on a shadow inventory of about 4 million homes, the map shows areas where the inventory would be cleared in less than 18 months, moving through time frames to areas where the inventory would take 10 years or more to clear.

The National Association of Realtors projects that about 4.9 million homes will be sold this year. About 3.5 million homes are listed for sale, or about a nine-month supply. In a balanced market, the supply is about six months.

• Foreclosure-sales slowdown a blessing and a curse

At the current rates of sales, it would take more than three years to sell 15.3 million homes, but just under four months to sell 1.6 million. You can see why the size of the shadow inventory matters. If you add that inventory of 3.5 million homes for sale, you're looking at four years versus one year. The time frame also depends upon when the shadow inventory hits the market.

The Wall Street Journal recently took a look at the varying numbers and the assumptions upon which they are based.

Basically, the issue is at what point in the foreclosure process do you start counting. Do you count homes where the payment is 60 days overdue? Amherst Securities does, which explains why it has one of the highest estimates for shadow inventory, 8.2 million to 10.3 million homes.

• Home prices down and expected to fall more

The lowest estimate, 1.6 million, is from CoreLogic, which starts counting at 90 days overdue, but rather than including all of those loans it calculates which properties are likely to end up as bank-owned properties.

Of course, all the estimates are just that: estimates. How many of the homes for which payments are overdue will eventually end up for sale depends upon many factors, including loan-modification programs, unemployment and the economy in general.