[quote=sdrealtor]
Oops there goes another shadow inventory house, oops there goes another…….[/quote]
I agree that the federal government strategy is preventing the shadow inventory from becoming real inventory, and will continue to do so as long as the federal government can continue the policy.
The only reason for trying to understand the size of the shadow inventory is to predict what might happen if the federal government cannot continue its current policy.
The policy has effects away from the housing market, affecting the value of the dollar and the willingness of people, domestic and foreign, to lend to the federal government, and to U. S. banks and quasi-banks.
There is no guarantee that the current policy can be continued indefinitely.
If the government returned to monetary discipline (soon), the assistance to the housing market would end precipitously, and values would return to levels determined by a normally functioning real estate market. This would be somewhere in the vicinity of 150% of 1998 values (for San Diego mid-market), perhaps overshooting low for a while (due to lots of foreclosures) before settling in.
If the government does not return to monetary discipline, the real estate market will avoid the decline, but others will be harmed to an equal or greater degree.
