One of the biggest unknowns in the housing industry is "shadow inventory." That term describes the number of homes that would be on the market if certain conditions were in place.

For example, many people would be more than willing to list their home for sale now if there were not so many other homes already competing for buyers in their neighborhood. And, given the basic law of supply and demand, more supply typically means lower prices.

Ted Jones, chief economist for Stewart Title, said he is concerned that a large number of "pent-up sellers" will enter the market once sales activity improves.

"There are a lot of people who would put their home on the market if they felt they could sell it," Jones said. "We just don’t know exactly how many of them are out there. When they do decide to sell, it will add to our inventories. So, we may run into a false bottom before we find the real one."

Quantifying shadow inventory is problematic because of the way it is gauged. Some lenders do not count a home as being part of shadow inventory even though the owner is in default and is absolutely headed to foreclosure.

Many analysts believe that the number of would-be homes for sale is far greater than the number of homes currently on the market. Stan Humphries, chief economist for Seattle-based Zillow, an online real estate marketplace, uses the iceberg analogy when describing today’s shadow inventory of homes.

"The portion of the iceberg below the waterline is inventory that’s waiting to come into the market at some point," Humphries said. "And as it bleeds into the market over time, it continues to put downward pressure on prices."

In a recent survey, Zillow found that nearly a third of homeowners would have considered putting their homes up for sale if the market were better. Nationally, that would mean between 11 million and 30 million homes that aren’t listed but are waiting on the sidelines.

Pat Lashinsky, chief executive of online brokerage site ZipRealty, said he knows that lenders are deliberately keeping homes off the market even though the practice will extend the road to recovery.

"They’re metering them out at an appropriate level to what the market will bear," Lashinsky said.

Credit rating agency Standard & Poor’s (S&P) conducted one of the few known national surveys on residential shadow inventory. The agency found that it would take at least three years to clear out all shadow inventory. It also revealed that many lenders would give up on trying to modify loans and turn their efforts toward loan liquidation, meaning selling the home for as much as the market would bear regardless of what the lender is owed.

"Overall, it is our opinion that recent positive housing reports should not be construed as a sign that the distress in the residential housing market is abating, but rather should be attributed to the temporarily limited supply of homes on the market," according to S&P analysts who wrote the report.

According to the S&P report, homes are falling into serious delinquency faster than REO transactions are closing. Furthermore, court delays, political pressure and servicing backlogs constrict the flow of foreclosures hitting the market to a trickle. These delinquent borrowers who have not received a foreclosure fuel the "rapidly" growing shadow inventory of properties, according to the report.

The first-quarter Zillow report found that foreclosures reached a new peak in March, with more than one out of every 1,000 (0.11 percent) U.S. homes going into foreclosure during the month. Negative equity across the country remained high, with 23.3 percent of single-family homes with mortgages greater than their value, up from 21.4 percent in the fourth quarter of 2009.

Housing market conditions varied across the country, and home values in most markets (106 of the 135 tracked by Zillow) continued to decline on a year-over-year basis.

You wonder how many more people would put their home on the market if they thought it would sell. So, if you’ve had your eye on a cute place in the neighborhood you always wanted to buy, knock on the door and ask what’s possible. There’s a better chance now that the owner has considered moving.

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