An article on MarketWatch describes how the “shadow inventory” remains a substantial risk to the housing market. The article reports that S&P analysts have observed that it is taking longer for the housing market to absorb foreclosed homes than first anticipated, and that the number of foreclosures “may be a drag on prices for a few more years.”
The glut of foreclosures is projected to hit cities such as New York particular hard, where it could take as long as 10 years for the market to return to “normal.” And while other areas will clear much faster, foreclosures will place downward pressure on prices for several more years.
A separate report on HousingWire from Amherst Securities Group said “the market is not taking into consideration the high likelihood of potential defaults on performing or re-performing mortgages when estimating future losses on these loans” and that “borrowers with substantially negative equity are very vulnerable to default."
While the news is not encouraging, it's information that we must take into account when making our plans for 2011 and beyond.
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