Why it Would Take 9 Years to Clear the Current Housing Backlog
At this point there are so many bank-owned foreclosed homes that it would take almost nine years to clear out the housing inventory. That time frame doesn’t even begin to take into consideration the additional homes that are likely to also enter the backlog while the current inventory of foreclosed homes gets cleared out.
According to The Wall Street Journal:
“How much should we worry about a new leg down in the housing market? If the number of foreclosed homes piling up at banks is any indication, there’s ample reason for concern.
“As of March, banks had an inventory of about 1.1 million foreclosed homes, up 20% from a year earlier, according to estimates from LPS Applied Analytics. Another 4.8 million mortgage holders were at least 60 days behind on their payments or in the foreclosure process, meaning their homes were well on their way to the inventory pile. That “shadow inventory” was up 30% from a year earlier.
“Based on the rate at which banks have been selling those foreclosed homes over the past few months, all that inventory, real and shadow, would take 103 months to unload. That’s nearly nine years.”
As we already know, this predicament already includes the government programs at work to artificially improve the situation. For example, the Home Affordable Modification Program, or HAMP, was shown a recent report from the Special Inspector General for the Troubled Asset Relief Program to be operating because, “supporting home prices is an explicit policy goal of the Government.” When this support slows down, and stops altogether, the foreclosed inventory could end up taking a lot longer than nine years to clear out.
See more details in The Wall Street Journal’s coverage of the 103 months it will take to clear housing inventory.