By: Gary Shilling (Bloomberg)
“There are now about 2 million excess U.S. housing units, over and above normal working inventories for new and existing homes. Some are listed for sale but many aren’t, including foreclosed houses and vacant properties that owners are keeping off the market until prices rise.
At current rates of housing starts and household formation, it will take about four years to work off this excess inventory.
- That’s plenty of time for those surplus houses to push prices down an additional 20 percent.
Also, the $25 billion settlement between mortgage servicers and state attorneys general and the federal government may have cleared the way for mass foreclosures and price-depressing sales.
Foreclosures, stringent lending standards and high unemployment lowered the homeownership rate to 66 percent in the fourth quarter of 2011, from its 69.2 percent peak in the fourth quarter of 2004. It may be on its way to 64 percent, or maybe even lower.
- I estimate that these conditions will create 3.9 million new renters by 2016.
Most will probably be in apartments, but some may rent single-family houses if the problems of maintaining them can be solved to the satisfaction of financial institutions and other large-scale owners.”
By: Gary Shilling
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