Beware what lurks in the shadows...

Pretty scary. 500k home for sale by borkers nationally. 600k reo units on Fannie/Freddie/FHA/private institutions. Now that's shadow inventory nationally. What if home prices drop another 10-20%, doesn't it mean the potential strategic/job loss foreclosures stands at millions? We are getting into the meat of the bubble cycle pricing. Regular joes who bought in 2001-2004 and took out some helocs.

Double dip herez we come. Oh this sucks for NYC re.

So the summary is that REO inventory held but busted GSEs plus banking sector is one month of existing home sales? I'm sort of at "So what?" on this.

But while we're doom and glooming, here is another view of what may lurk in the shadows: http://www.cnbc.com/id/38691272

A year into our massive stabilization effort, we have 1/4 of all re sales from reo? Even if unemployment went down 25bps a month till we hit 5%, the backlog of delinquent mortgages that'll get flushed out will be HUGE.

"Consumers' focus on shedding debt rather than spending will prevent the economy from growing and bring a halt to the recovery,"

That seems key; not many are going out and spurring economic growth with their extra cash...they are eliminating debt.

So, even in the face of outrageously low interest rates we still can't move sufficient amounts of product. The reason is that the product is inappropriately priced. As soon as enough time passes the products will relinquish their hold on memory pricing and allow the market to seek it's own level. What's left? They're giving the money away and still no one touches it. There's a reason and it's pure science.