Mark Hanson: Housings Shadow Inventory May Take 8 Years to Clear

05-28-2010 • mhanson.com/blog

It will take 42 months to clear the portion of the 8 million loans presently in the distressed pipeline that will ultimately be liquidated. If Foreclosures remain at April’s record high of 92.5k, it will take 101 months. With 900k record foreclosures in 2009 (but only 2.3mm since Jan 2007), 2.16mm (180k*12) needed every year for the next four years to purge the distress inventory plaguing and overhanging the market, and potentially fewer existing sales in 2010 than the 5.15 million in stimulus-driven 2009, it is easy to understand the challenge facing the housing market ex-stimulus. I am a firm believer that the only way the housing market stands a chance of maintaining momentum post-tax credit is for Foreclosures to surge because they are what are in demand. In fact, over the past few months investor demand has waned due to the lack of Foreclosures and competition from swarms of first-timers waiving Obama coupons who they refuse to bid against. First timers, who are notorious for turning it off and on overnight, now make up some 50% of all sales according to the most recent Existing Home Sales report. That is a shaky foundation.