[quote=CA renter]
An example of “shadow demand” would be the existence of 500 million Chinese with massive amounts of USD who plan to buy up our real estate as the dollar crashes. That would be an unusual and extraordinary demand variable that would qualify as “shadow demand.” ;)[/quote]
Sure, let’s put the shadow Chinese buyers in the same category as the shadow inventory due to potential future NODs for prime ARM loans that reset in 2013.
You stated that all the items I point out are normal demand. My point is that shadow inventory zealots do not account for any possibility of increased demand from any source (normal or “shadow”). They point to things like permanent 30% unemployment sapping all future demand and spiraling cycles of price declines due to increased supply. There is no consideration of the impact of price elasticity of demand or other basic concepts that impact the supply/demand relationship among these zealots.
I agree that there will be significant supply coming from recycled homes over the next couple of years due to foreclosures. But to understand its impact on price one has to compare this rate of recycled homes to demand as well as to the potential for displacing new-built product with recycled product.
