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- Rising mortgage rates will tame the enthusiasm of some homebuyers. But the lack of choice when choosing a home will also hinder buying.
- Inventory levels are already very low. Newly constructed home inventory is essentially at a 50-year low. Existing home inventory is hovering at a 13-year low.
- Increases from housing starts will bring more inventory to the market. But the current production of little over a million is not sufficient. Another quick ramp up of around 40 to 50 percent is needed to adequately supply the market.
- Another source of potential inventory is from homes where mortgages have not been paid or the home is already in the foreclosure process though not yet cleanly released from all the paperwork. How is this so-called shadow inventory trending?
- The table below shows the shadow inventory situation for all 50 states. It shows the current as well as peak distressed conditions. The data is also overlaid with home price trends to help gauge where shadow would be most useful. Naturally, fast price appreciating markets such as California and Nevada would like to have more inventory, but the shadows in these states have been greatly depleted. California's shadow has been slashed by 71 percent while Nevada cut its future distressed homes by 59 percent.
- At the other end, slow price appreciating states have no need for additional supply. Yet, states like New Jersey, New York, and Connecticut have barely dented their shadow and these distressed homes still loom over the market. These states have only reduced their shadow by around 10 percent from the peak condition. Take a look at your state's condition after the jump.
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