If you extrapolate, Morgan Stanley's calculations means we have a shadow inventory of 38 months, on top of the current 8.7 months supply. This would imply almost 4 years of backlog. Gary Shilling says that home prices will fall another 20% before hitting bottom.
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About 1.8 million homes that are delinquent or in foreclosure loom as additional supply for the struggling U.S. housing market, according to CoreLogic.
The so-called shadow inventory amounted to a nine-month supply of properties, about the same as a year earlier, the Santa Ana, California-based real estate data service said in a report today. The company measured homes ranging from 90 days delinquent on mortgages to properties seized by lenders in foreclosure proceedings.
Rising inventory threatens to further depress home values as sales slump. The shadow inventory is in addition to the 8.6-month supply of homes for sale on the open market in February, the National Association of Realtors reported March 21. A healthy market has about a six- month supply, according to the Realtors group.
The shadow inventory “illustrates the distressed pipeline that has to filter through the market before the market is normalized,” Sam Khater, chief economist for CoreLogic, said in a telephone interview from Vienna, Virginia. “It’s going to be a negative drag for some time.”
Home prices in 20 U.S. cities fell an average 3.1 percent from a year earlier in January, according to the S&P/Case- Shiller index. The decline was the biggest on a year-over-year basis since December 2009, the group said yesterday in New York.
Oliver Chang, a San Francisco-based analyst at Morgan Stanley, and Laurie Goodman, an analyst at Amherst Securities Group LP in New York, have estimated that the U.S. shadow inventory includes as many as 8 million properties. The higher projections count homes with shorter delinquency periods and assume more residences will be lost to foreclosure, Khater said.
There were about 4.36 million U.S. home loans that were 90 days late or in foreclosure in February, down 16 percent from a year earlier, Lender Processing Services Inc. (LPS), a Jacksonville, Florida-based mortgage-data company reported March 28.
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The 7-Million Housing Shadow Inventory Could Trigger A Price Avalanche
Much has been written about the so-called "shadow inventory" since the term was first coined a few years ago. Some analysts and commentators have argued about whether it even exists. Let's take an in-depth look at this shadow inventory and see whether it really is a threat to housing markets around the country.
http://www.businessinsider.com/the-7-million-shadow-inventory-could-set-off-a-housing-price-avalanche-2010-9#ixzz1I7bgOswg
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Here's Why House Prices Will Now Drop Another 20%
By Gary Shilling
Last spring, many believed that not only was the housing collapse over but that a robust rebound was underway. Investors were crowding into foreclosed house sales and bidding up prices in California, often the bellwether state for new trends. The tax credit of up to $8,000 for new homebuyers that expired in April spurred buyers and promised to kick-start housing activity nationwide.
HAMP was trumpeted by the Administration to help 3 million to 4 million homeowners with underwater mortgages by paying lenders to reduce monthly payments to manageable size and then paying homeowners to continue to make those payments.
But then a funny—or not so funny—thing happened on the way to housing recovery...
http://www.businessinsider.com/gary-shilling-house-prices
There are at least 20 housing charts at the above link.