For example, take analyst’s category #4
4. delinquent, NOD not issued, no short sale in progress .
These are a long way from being on the market. Maybe a couple years at the current pace. [/quote]
Only due to the government intervention rules. Shadow inventory is only of interest if you think there is a chance that government intervention will end. It will remain off the market and have no effect if government intervention continues at its current level (or increases).
If mark-to-market were reinstated, and buyer incentives were curtailed, all enjoying government largesse would know it was ending, and ALL the shadow inventory would come quickly to market, REO’s as bulk sales or normal listings, the rest as short sales and foreclosures proceeding at normal pace. The aggregate increase in supply and reduction in demand would have a rapid and substantial effect on price.
But, again, there is not much point to trying to calculate and debate the unknowable size of shadow inventory, and its potential effect on prices unless you think government intervention will subside. I put that probability at near zero.
