Mortgages more than 30 days late or in the foreclosure process totaled 6.4 million units in April. Of the 6.4 million units approximately 4.2 million are not currently in foreclosure. This is the shadow inventory which is keeping a lid on housing prices. In addition there are nearly 2,000,000 housing units which are not delinquent that are more than 50% upside down and are likely to add to the shadow inventory in the future.
Separately, the new home-builder survey showed that home-builders are still depressed. The survey level of 16 was the lowest it has been since September. Any number below 50 is considered a negative outlook on the future of home building. New-home starts fell over 10% in April after rising in March. In addition permits for new home construction fell 4% in April. This is a very poor start to what is traditionally the strongest season for home sales. In addition when you consider the fact that new-home sales drive the purchase of durable goods such as appliances and furniture as well as decor items the continued slump in new housing will ripple throughout the economy.
On the commercial front the only expansion activities seen are from the discount retailers like Dollar General and Family Dollar. Other than that sub sector some merchandising experts are saying that additional retail space will not be needed for several more years. It will all depend on whether high gasoline prices and food prices are here to stay for a while or whether they will pull back and consumers will have more of their hard-earned dollars to spend.
