Shadow inventory in housing

Again, from David Rosenberg:

Meanwhile, the deflation risks in housing have not gone away, and we saw that in the 1.7% slide in median existing home prices in October (sharpest slide since April). This was the FOURTH month in a row of negative pricing action in the resale market. So, while this data may well show that the inventory backlog has come down to what seems to be a respectable 7 months’ supply, we also know from the U.S. Census data that there are around 3½ million homeownership units that are currently being taken off the market for unstated reasons. (We reckon that this is a pretty good proxy for the ‘shadow’ foreclosed inventory at the banks). In other words, we very likely have the inventory backlog at closer to 14 months’ supply and this is why prices are still declining. At the margin, there are still many more sellers than there are buyers.

David Rosenberg writes a very interesting daily report, available here.