From the NY Post:
The drop in US home prices — which are already down 28 percent since 2006 — could languish until 2013 as a massive 12 million homes in a shadow inventory still have to clear through the system.
Shadow inventory, which are homes in mortgage default or those already foreclosed upon but not yet on the market, will keep values from recovering as they drip back onto the market, experts said.
“Whether it’s the sidelines, shadow or current inventory, the issue is there’s more supply than demand,” Oliver Chang, a US housing strategist with Morgan Stanley told Bloomberg News, which first reported on the data supplied by his firm as well as Moody’s Analytics, Fannie Mae and Barclays.
The size and effect of the shadow inventory was one of several bleak housing reports released yesterday, with each pointing to continued weakness in the real estate sector.
The value of the nation’s homes could drop by as much as 15 percent in the next two years on the way to a new bottom, and remain stuck there at least three years, according to a report by Morgan Stanley.
One economist said that once the bottom comes, it could take 10 years for prices to recover to their historic annual growth track of 3 percent. Chief economist Mark Zandi of Moody’s Analytics called his recovery outlook “a long, if not lost, decade.”
The slide in U.S. home prices may have another three years to go as sellers add as many as 12 million more properties to the market.
Shadow inventory — the supply of homes in default or foreclosure that may be offered for sale — is preventing prices from bottoming after a 28 percent plunge from 2006, according to analysts from Moody’s Analytics Inc., Fannie Mae, Morgan Stanley and Barclays Plc. Those properties are in addition to houses that are vacant or that may soon be put on the market by owners.
Fannie Mae, the largest U.S. mortgage finance company, today lowered its forecast for home sales this year, projecting a 7 percent decline from 2009. A drop in demand after the April 30 tax credit expiration “suggests weakening home prices” in the third quarter, according to the report.
There were 4 million homes listed with brokers for sale as of July. It would take a record 12.5 months for those properties to be sold at that month’s sales pace, according to the Chicago- based Realtors group.
“The best thing that could happen is for prices to get to a level that clears the market,” said Shapiro, who predicts prices may fall another 10 percent to 15 percent. “Right now, buyers know it hasn’t hit bottom, so they’re sitting on the sidelines.”
After reaching bottom, prices will gain at the historic annual pace of 3 percent, requiring more than 10 years to return to their peak, he said.
“A long if not lost decade,” Zandi said.