4 years to clear the Shadow Inventory.
People often talk of the Shadow Inventory, that mysterious excess capacity of homes that will hit the foreclosure market, but is currently in limbo and have not hit the foreclosure market for whatever reason. There is the usual speculation ranging from it being the result of large banks controlling the flow of foreclosure inventory to protect their assets to conspiracy theorists who think the Government is behind it. But how do you measure it?
Well, economists at Morgan Stanley included the inventory of homes will eventually need to be processed through the REO process, including those that are going through HAMP and HAFA right now. While others just measure those that are 90 days delinquent in their mortgage payments. However you measure it, there is a lot of interest in trying it quantify the size of the Shadow Inventory.
Different bloggers and journalists have written about and speculated as to the size of this Shadow Inventory. This week, Morgan Stanley took on the task and reached the conclusion that it would take up to 4 years to clear the Shadow Inventory. The number of homes were calculated at 8 Million.
Is this assessment accurate or inaccurate? Who knows. Capital Economics did their own analysis and came to the conclusion that 5.5 Million homes (short of 3 years to deplete) would fall into the Shadow Inventory. Regardless of whose numbers you choose to believe, it is very large at between 3 – 4 years. It looks like we will have a few more years of having to deal with distressed properties.
