Shadow inventory could last four years
The picture varies drastically by state, with New Jersey facing 51 months of inventory but hard-hit Nevada facing only seven, according to NAR estimates.
One big issue that will determine the duration of the housing crisis is how much "shadow inventory" still remains to hit the market – homes that have been foreclosed on or will be foreclosed on but are not yet for sale.
Standard & Poor's estimates that the shadow inventory is enough to last four years, or about eight times what you'd see in a healthy market. But as Christine Ricciardi of Housing Wire notes, the shadow inventory varies drastically by location. Or, don't forget that all real estate is local.
The National Association of Realtors has come out with an estimate of shadow inventory by state, using a variety of factors in its calculations.
Blog post continues after video.
The NAR has sliced and diced the data two ways, looking at total number of homes likely to hit the market and the amount of time it would take to sell off the inventory, based on current sales trends, including the percentage of distressed-property sales. A six-month inventory is considered healthy.
Not surprisingly, the state likely to have the greatest number of homes waiting in the wings is Florida, with an estimated 444,461 homes in the foreclosure pipeline. Next is California, with 227,961. Those two states are followed by Illinois, New York, Texas, New Jersey, Ohio, Michigan, Georgia and Pennsylvania. The states with the fewest homes in the shadows are Vermont, Alaska, North Dakota, South Dakota and Wyoming.
If you look at the data based on months it would take to clear the estimated shadow inventory, the picture is a little different. The state that would need the most time to clear its inventory is New Jersey, estimated at 51 months. That's followed by New Mexico, at 38 months; New York, 34 months; and Utah and Rhode Island, each at 32 months.
Standard & Poor's, using different data and methodology, estimates that it will take 10 years to clear the shadow inventory in the New York metropolitan area.
Based on the NAR calculations, Florida has 29 months of inventory, California has 11, Arizona has nine and Nevada has seven, suggesting that the three hard-hit Western states may recover more quickly than some states that have suffered fewer foreclosures.
Selma Hepp, an NAR research economist, points out that a number of factors could change the scenario, including a change in the pace of home sales or the percentage of sales that are distressed properties. Plus, she adds, there are a lot of unknowns, including how the controversy over "robo-signing" and the bank foreclosure process is resolved.
Watching the video makes me sick.. who in their right mind would think this is the bottom.
The foreclosure market is artificial. What happens when they eventually get rid of these people and these people can't buy another home anytime soon... So who will replace these units?
I admire the people who own 2 -5 times as much on their mortgage than homes selling in their neighborhood and they are still making mortgage payments. Sooner or later, more people will walk away as foreclosure properties are dumped on the market.. The longer the foreclosed homes are kept in hiding, the longer this housing market will remain the same.
Let's talk about loans???? If this is the bottom, I'd be totally shocked... no way, no how..
How many homes are in subdivisions that have homeowners dues, which aren't being paid. The people still living there or not in foreclosure are being asked to foot the bill for the whole HOA..
Wait another 4 or 5 YEARS... Vegas, property that used to sell for millions can be picked up for less than 500,000.. Condo's that sold for 500k - 1million you can get for 100-200k.. 5,000 people LEAVING per month from Vegas. Families are living together now, so the true measure of this disaster can't be measured.
Good luck with this optomistic points of view. Be interesting if these talking heads would post the properties they are purchasing NOW! Put their money where they mouth is.. then talk a year from now.
About Teresa Mears
Teresa Mears is a veteran journalist who has been interested in houses since her father took her to tax auctions to carry the cash at age 10. A former editor of The Miami Herald's Home & Design section, she lives in South Florida where, in addition to writing about real estate, she publishes Miami on the Cheap to help her neighbors adjust to the loss of 60% of their property value.