The attached report from Amherst Securities on shadow inventory is a must-read. It argues convincingly that the stated inventory number of 8.5 months of homes on the market in August is totally misleading because there are 7.5 MILLION mortgages that have already defaulted, 7 million of which will go all the way through to foreclosure, REO and sale -- an ADDITIONAL 16 MONTHS OF INVENTORY! In other words, the real inventory is TRIPLE what everyone thinks it is...and this doesn't include any new defaults, of which there are approx. 300,000/month.
H/T Whitney Tilson of Tilson Funds