Amherst Securities Group analysts predict that the crash in U.S. home prices will probably resume because about 7 million properties that are likely to be seized by lenders have yet to hit the market. The “huge shadow inventory” reflects mortgages already being foreclosed upon or now delinquent and likely to be, which compares to 1.27 million such mortgages in 2005.
Assuming no other homes were on the market, it would take 1.35 years to sell the properties, based on the current pace of existing-home sales. A change in the mix of foreclosures and traditional sales over different parts of the year raised prices in the period, as the distressed share shrank. Accounting for efforts to have more loans reworked to avert foreclosure will not make much of a difference in the shadow inventory, with optimistic assumptions leading to a reduction in the amount by 1 million.