Housing Doom: Housing Inventory Enormous - Both Seen And Unseen

Posted by Ian Cooper - Tuesday, November 23rd, 2010

From Housing Doom:

"There’s a vacant house just down the street from me.  The owners just picked up and left several months ago.  About two months ago the lender sent out landscapers to clean the yard up.  Since then, the house has just sat there.

There are other houses out there like my neighbor’s former residence.  Lots and lots of them. [Thanks L!]

CoreLogic (NYSE: CLGX), a leading provider of consumer, financial and property information and business services, reported today that shadow inventory of residential property as of August 2010, reached 2.1 million units, or eight months worth of supply, up from 1.9 million, or a five-months’ supply, from one year earlier. With visible inventory remaining flat at 4.2 million units, the change in shadow inventory increased the total supply of unsold inventory by 3 percent.

Add this unseen inventory to the listings that actually have “for sale” signs in front of them and it’s clear that there’s a lot homes out there between the current housing market and “recovery”:

[T]he visible supply of unsold inventory was 4.2 million units in August 2010, the same as the previous year. The visible inventory measures the unsold inventory of new and existing homes that were on the market. The visible months’ supply increased to 15 months in August, up from 11 months a year earlier due to the decline in sales during the last few months.

The total visible and shadow inventory was 6.3 million units in August, up from 6.1 million a year ago. The total months’ supply of unsold homes was 23 months in August, up from 17 months a year ago. Although it can vary and it depends on the market and real estate cycle, typically a reading of six to seven months is considered normal so the current total months’ supply is roughly three times the normal rate.

Diana Olick of CNBC is tentatively advocating a return to government incentives:

Perhaps it’s time to look at a new government incentive, this time for those previously dreaded real estate investors.

If the government avoids the temptation though, we might start seeing the most tempting incentive possible for buyers- rock bottom prices with little downside risk.  Do you suppose they’ll really let it happen?"

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