I had a meeting with some bankers at Chase on Friday and we discussed the issue of inventory. Chase alone currently has over 350,000 homes off the market. Sounds like anyone trying to predict the market could be off by a large margin if you ask me.
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350,000 shadow inventory certainly sounds large, but what does it mean ?
Where (geographically) are these distributed ? How many are in Vegas and Florida? How many are in Souther CA coastal regions ?
How large is this number with respect to home building ? (Both are potential future inventory)
Consider that housing starts have been at a rate of 1 to 1.7 Million units per year from around 1992 through 2006. In 2008-2009 we averaged about 700,000 units per year.
Even if we consider circa 1994 levels of 1.2 Million units, we have already underbuilt by 1 Million units.
Now this is by no means a complete analysis. Plenty of holes. But, the recycled housing available from shadow inventory may or may not be large, relative to the deficit of new homes built.
Ultimately, the impact of the shadow will depend on the location distribution of the shadow inventory and the timeframe over which it is released.
