In order to really de-lever the housing market something needs to be done about the 20 to 30 million homeowners in a negative or “effective” (lacking the equity to pay a Realtor 6% and put 20% down on a new house) negative equity position; with 2nd liens; and without the credit needed to qualify for a new vintage loan. That’s because repeat buyers are the “durable” demand cohort, not first-timer buyers and “investors” who come and go with the stimulus wind like we saw in 2010 and will again in the second half of this year.
Ritholtz then says:
Quite a few comments about Mark’s 25-40m ghost inventory. My back of the envelope calculations (data from Census):This seems to be a calculation of what Hanson calls "Distressed Loans", not of any items in the Ghost Supply:
131 million housing units, with an owner occupancy rate about 66.66%. About ~88 million homes, of which 30% or so — about 27 million — have no mortgages. Of the remaining ~60 million houses, if the general estimate of 20-25% are underwater is accurate, than its about 12-15 million homes.
- “Effective” negative equity (lacking the equity to pay a Realtor 6% and put 20% down on a new house)
- Second liens
- Impaired credit