If you have been waiting for the “foreclosure tsunami” to hit the real estate market, you might not have to wait much longer. According to real estate analytics firm CoreLogic, another wave of distressed residential properties is due to “flood an already saturated residential real estate market in the coming months”[1]. Based on a recent report, the firm believes that there are currently 2.1 million “distressed, but not-yet-listed residential properties nationwide” in August of this year. That is eight months’ worth of properties not yet on the market and scheduled to hit all at about the same time.

Not counting this “shadow” market, there were 4.2 million units available on the market in August, which is estimated to be enough to supply the market for a full 15 months. Mark Fleming, CoreLogic’s chief economist, believes that the coming release of the shadow market onto the real market could dramatically increase the risk of more price declines in the housing market, and points out that “inventory is the key to predicting the future of home sales and prices”[2]. CNBC real estate reporter Diana Olick suggests in her column that “there aren’t enough investors to soak it [the distressed property inventory] all up,” and suggests that real estate investors are next in line for a “new government incentive” to get them to buy more houses.

Do you think that this is appropriate? Do we want the government horning back in on the housing market in light of its previous failures to “save the day?”

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[1]http://www.bizjournals.com/portland/news/2010/11/22/shadow-real-estate-inventory-up-10.html
[2] http://www.cnbc.com/id/40319531