"Shadow Inventory" Means Home Prices Staying Flat

There is a swollen inventory of 7 million homes in the "shadow inventory" - more than 15 months worth at the current rate of sales, according to a recent article in Barrons. These are homes that are headed for foreclosure - mortgages that are at least 60 days overdue, of which nearly 10% haven't made a payment in two years.

The shadow inventory is in addition to the real inventory of 3.6 million unsold homes, more than an 8 month supply.  Another 300,000 homes are added to the shadow inventory each month. Unfortunately, programs like Making Home Affordable, which has generated more than 630,000 loan modifications so far, can't make a dent in this shadow inventory.

What It Means to You

A two year glut of unsold and shadow inventory probably means housing prices will continue to fall, or at least not improve by much very soon. Median home sale prices were $177,700 in August 2009. This is higher than the January sales price of $165,000 but 12.5% lower than a year ago.

If you absolutely must sell your house, you might have to wait awhile before prices start to improve. If you don't have to sell, then it might make more sense to stay put. Consider whether you can take on boarders, whether they be friends or family, to help make ends meet.

Related Articles

• Banks Must Stop Record Foreclosures
• Understanding the Foreclosure Process
• Treasury Expands MakingHomeAffordable
• Bank of America

(Credit: Justin Sullivan/Getty Images)

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