Should we not look at these trends and extrapolate out? That is the wise thing to do?
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Sure, we should look at all those trends.
For example in 2004-2005 if one used current trends to extrapolate where the housing market and jobs were headed (extremely low unemployment, prices rising) one could have gotten themselves into a bit of trouble.
Shadow inventory is to bears what pent-up demand is to bulls. Both are loosely defined concept which have some truth to them but are impossible to measure.
If one wants to cite shadow inventory as a force on the markets they should be forced to address the potential of pent-up demand.[/quote]
Sometimes you have to integrate common sense with analysis. The housing bubble fueled employment. It was not unpredictable that employment would plummet as the bubble did. The bubble was the economy.
Pent up demand depends on job growth. Unless you count demand as somebody that wants to buy a house and can’t you have a problem. Sideline money is dwindling + job contraction=Lower demand
