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In mid-2011, the "shadow housing inventory" amounted to a total of 3.5 million units
This excess supply could have an accumulated negative impact of 1.4 points on GDP growth between 2011 and 2014
Since the fall of 2010, the number of homes that have begun a foreclosure process has gradually dropped to just over 222,000 units in June 2011, 40% below the high of March 2010, according to data from RealtyTrac. Figures from the Mortgage Bankers Association (MBA) point to the same trend and indicate that the amount of the mortgages that started on the foreclosure process in the first quarter of 2011 was equivalent to 1.03% of all residential mortgages. This figure is nearly 0.45 percentage points below the high of June 2009.
This slowdown suggests that the effects of the residential and mortgage crisis that began in 2006 have started to ease. However, this does not mean that the negative impacts of this crisis on the economy in general, and on the housing market in particular, will disappear in the short term.
In fact, the high level of current foreclosures, which still represent 4.5% of the residential portfolio, and the probable new defaults over the coming quarters, suggest that the negative effects of this situation will continue both for households and economic activity in general. One of the features of the present sluggish economic recovery is the negative contribution of residential investment to GDP growth, whereas it was among the driving forces behind the three previous recoveries.
The high volume of foreclosure proceedings currently underway and the potential increase in such proceedings resulting from persistently high mortgage delinquency levels, suggests that there is a shadow housing inventory which will have a direct impact on the prices of residential homes and the number of new home starts. Indirectly, its effect will be passed on to household consumption through real-estate wealth, and to residential investment.
An initial estimate of the shadow housing inventory indicates that it could number around 3.5 million units in June 2011: 1.95 million units of foreclosures and 1.55 million defaults. These figures, together with the number of homes currently on sale, will amount to a supply of homes of around 7.5 million units, nearly three times the figure at the end of the recession of 2001.
However, the excess supply has been moderating since 2010 and current data suggest that the trend will continue over the coming years, given the slight increase in sales and the downward trend in foreclosures and mortgage defaults.
Residential prices are reacting in two ways: in the case of foreclosed homes they are adjusting fast, while the rest are stabilizing.
Figures for June 2011 have once more highlighted the housing price trend observed throughout 2010 and the start of 2011: while prices of foreclosed homes have adjusted strongly, those of homes that have not been foreclosed have stabilized. In fact, in mid-June 2011, prices of foreclosed homes had fallen by nearly 15.0% in year-on-year terms, while those of other homes had dropped by barely 1.1%.
read more U.S.: Residential foreclosures: Trend and economic impact
This excess supply could have an accumulated negative impact of 1.4 points on GDP growth between 2011 and 2014
Since the fall of 2010, the number of homes that have begun a foreclosure process has gradually dropped to just over 222,000 units in June 2011, 40% below the high of March 2010, according to data from RealtyTrac. Figures from the Mortgage Bankers Association (MBA) point to the same trend and indicate that the amount of the mortgages that started on the foreclosure process in the first quarter of 2011 was equivalent to 1.03% of all residential mortgages. This figure is nearly 0.45 percentage points below the high of June 2009.
This slowdown suggests that the effects of the residential and mortgage crisis that began in 2006 have started to ease. However, this does not mean that the negative impacts of this crisis on the economy in general, and on the housing market in particular, will disappear in the short term.
In fact, the high level of current foreclosures, which still represent 4.5% of the residential portfolio, and the probable new defaults over the coming quarters, suggest that the negative effects of this situation will continue both for households and economic activity in general. One of the features of the present sluggish economic recovery is the negative contribution of residential investment to GDP growth, whereas it was among the driving forces behind the three previous recoveries.
The high volume of foreclosure proceedings currently underway and the potential increase in such proceedings resulting from persistently high mortgage delinquency levels, suggests that there is a shadow housing inventory which will have a direct impact on the prices of residential homes and the number of new home starts. Indirectly, its effect will be passed on to household consumption through real-estate wealth, and to residential investment.
An initial estimate of the shadow housing inventory indicates that it could number around 3.5 million units in June 2011: 1.95 million units of foreclosures and 1.55 million defaults. These figures, together with the number of homes currently on sale, will amount to a supply of homes of around 7.5 million units, nearly three times the figure at the end of the recession of 2001.
However, the excess supply has been moderating since 2010 and current data suggest that the trend will continue over the coming years, given the slight increase in sales and the downward trend in foreclosures and mortgage defaults.
Residential prices are reacting in two ways: in the case of foreclosed homes they are adjusting fast, while the rest are stabilizing.
Figures for June 2011 have once more highlighted the housing price trend observed throughout 2010 and the start of 2011: while prices of foreclosed homes have adjusted strongly, those of homes that have not been foreclosed have stabilized. In fact, in mid-June 2011, prices of foreclosed homes had fallen by nearly 15.0% in year-on-year terms, while those of other homes had dropped by barely 1.1%.
read more U.S.: Residential foreclosures: Trend and economic impact
