Shadow Inventory May Hamstring Recovery, Say Fannie Economists

The shadow inventory of homes continues to pose risks to the nation's nascent housing market recovery, Fannie Mae's economics and mortgage market analysis group says in a new report.

‘In the minutes from the March Federal Open Market Committee meeting, committee members expressed concerns that the foreclosure rate could remain elevated or even move higher in coming quarters,’ the report states. "Consequently, this could potentially add supply to the already large inventory of vacant homes, posing downside risks to home prices."

Fannie Mae notes that two recent initiatives announced by the Obama administration – the Federal Housing Administration's short-refinance program and the principal write-down enhancements made to the Home Affordable Modification Program – could chip away at the shadow inventory, but adds it will "be some time before we see indications of how effective the programs will be."

SOURCE: Fannie Mae


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