Shadow Housing Inventory Stalls Economic Recovery The housing sector that dragged the economy into recession three years ago, is still in bad shape. Home sales are eroding despite low mortgage rates. There are just too many homes on the market and not enough people to buy them. Plus, there's a huge shadow inventory: Millions of other homes are waiting to come on the market.
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Shadow Housing Inventory Stalls Economic Recovery

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Shadow Housing Inventory Stalls Economic Recovery

Shadow Housing Inventory Stalls Economic Recovery

Shadow Housing Inventory Stalls Economic Recovery

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The housing sector that dragged the economy into recession three years ago, is still in bad shape. Home sales are eroding despite low mortgage rates. There are just too many homes on the market and not enough people to buy them. Plus, there's a huge shadow inventory: Millions of other homes are waiting to come on the market.

RENEE MONTAGNE, Host:

This is MORNING EDITION from NPR News. I'm Renee Montagne.

STEVE INSKEEP, Host:

And I'm Steve Inskeep. Good morning.

H: In a tough economy, companies can downsize.

MONTAGNE: Consumers can pay down debt. People can adjust.

INSKEEP: But vacant houses don't go away.

MONTAGNE: So years after the collapse of the housing bubble, there is still an excess supply of houses. Economists say there are now 1.7 million more houses than there's a demand for, and that may only be part of the problem.

INSKEEP: NPR's Yuki Noguchi explains.

YUKI NOGUCHI: This is what is known as shadow inventory. And it's basically impossible to know how big it is.

INSKEEP: Glenn Kelman is chief executive of Redfin, an online realty firm. Kelman says the dynamics indicate this hidden inventory of homes is huge, and will keep the housing market depressed for some time.

MONTAGNE: So even as the supply stabilizes, there's going to be a problem in demand. And the supply isn't as stable as people think.

NOGUCHI: Kelman says he thinks millions of people are essentially trapped in their homes. Half of potential Redfin customers who want to sell, end up not listing because they can't afford to sell their homes in this market. Kelman says banks are much worse off, and overwhelmed by the number of homes they're trying to unload.

MONTAGNE: They just can't get all the properties out on the market. So people sometimes suspect there's this nefarious plot to titrate inventory to demand. But I think part of it is that these guys just can't hire real estate agents fast enough, can't process the paperwork quickly enough. I think all hell is breaking loose at the big banks - who are still trying to figure out how to sell houses. That wasn't their original business.

NOGUCHI: William Wheaton does not agree. He's a professor of economics at MIT, and doesn't think this is a problem. He considers himself one of the lone bulls of the housing market.

INSKEEP: My suspicion is that this shadow inventory really isn't that big.

NOGUCHI: Wheaton says he thinks banks aren't hanging onto properties. He guesses at most, a half million bank-owned homes are stuck in limbo between foreclosure and resale. And on the other side, he says buyers are snatching up low-priced homes even in the most distressed markets, like California.

INSKEEP: There's a steady stream of buyers, so that even with all the foreclosures going on in California, the number of units for sale has actually been decreasing, quite consistently, for the last year.

NOGUCHI: Wheaton also says there are more than a million new households created every year, on average, and those people will soon mop up the excess supply.

INSKEEP: The housing market, as a whole, is going to grow its way out of this problem.

NOGUCHI: Yuki Noguchi, NPR News.

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