How Big Is The Shadow Inventory?

Bloomberg has a story about shadow inventory in the housing market. They make some claims based on an online survey:

According to Zillow’s latest Homeowner Confidence Survey, 12 percent of homeowners said they would be “very likely” to put their home on the market in the next 12 months if they saw signs of a real estate market turnaround, 8 percent said “likely,” while 12 percent said “somewhat likely.”

The survey of 2,123 adults aged 18 and older, of whom 1,357 are homeowners, was conducted online.

Survey results could translate into around 20 million homeowners trying to sell their homes, a startling number given that the Census bureau indicates there are 93 million U.S. houses, condos and co-ops, Humphries said.

According to the National Association of Realtors, the market is currently on track to sell 4.89 million homes annually.

“At this pace, it would take about four years to run through this amount of backlogged inventory,” he said.

Adam York, economist at Wells Fargo Securities in Charlotte, North Carolina, said 20 million may be too lofty a number, but contends that the amount of homes that have not yet been listed for sale could be around 4-5 million.

“That is still an extremely high number,” he said. “Supply is and will continue to be one of the main obstacles to a housing market recovery in the year ahead.”

I think a lot depends on your definition of a “market turnaround.” I remain unconvinced that the general public has been disabused of their belief that housing has only suffered a setback and is destined to go off on another run. I suspect among those that responded positively to the survey there are quite a few who have false expectations of what their house might fetch in a sale.

Nevertheless, there is bound to be some pent up supply that will come on the market given stablization. I just don’t think it’s anywhere near the magnitude mentioned in this article. Quite the contrary, I tend to think that this debacle and its aftermath are going to suppress the resale market for some time as many people seem to be hunkering down in an effort to repair personal balance sheets.

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