Housing's Big "Shadow": Up to 10M More Homes Could Be for Sale, Zillow.com Says

With mortgage rates still near generational lows, national home prices down more than 20% from the peak and the government providing tax incentives for homebuyers, it seems like a great time to buy a house; at least, that's what your friendly neighborhood realtor says on those late-night TV commercials.

But is it true?

"If you've got good credit and can put a down payment down...and you're planning to stay in the house for an extended period of time [like] seven-to-10 years, then now could be an attractive time to buy," says Zillow.com chief economist Stan Humphries.

But those people who can afford to wait to buy a house are probably better off, Humphries says. Based on the most recent data, there are 3.6 million existing homes and 236,000 new homes for sale in America; that equates to 8.6 months and 9.2 months of supply, respectively, based on current sales rates.

But that's only half the story. Humphries notes the official inventory numbers "don't capture all the foreclosures that are out there," or the so-called shadow inventory of homes waiting to come on the market.

So how big is the "shadow" hanging over housing? A recent Zillow.com survey shows 8% of homeowners, or about 10 million Americans, are "very likely" to sell if and as local conditions improve.

Humphries doesn't expect anywhere near 10 million more homes to come on the market in the near term. But this "pent-up supply" combined with foreclosures already in the pipeline and those yet to come because of negative equity and job losses means it will take three-to-five years "before we see more normal appreciation rates return to the market," the economist predicts.

In other words, time is still on the buyers' side -- yes it is.