By Pat Shannan

A recent Morgan Stanley finance report cited by financial analyst Jeff Adams warns that a huge “shadow inventory” of homes with delinquent mortgages, which has yet to move through the foreclosure process, would take 47 months to clear at the current market sales rate.

While realtors and bankers claim—or at least want the American people to believe—that the real estate market is “turning around,” Adams reports that Americans are not being told of this “shadow inventory” amid the rising tide of residential foreclosures that continues to paralyze prices and hamper housing market recovery. It appears this second foreclosure wave is about to arrive.

More than 10 percent of all mortgage borrowers in the U.S. are seriously delinquent, and the shadow inventory riding that new tidal wave totals around 8 million. While there are no exact numbers on the extent of the nation’s growing shadow inventory, Morgan Stanley is telling its investors to slow down and not jump too soon, Adams adds.

People in Florida and California, particularly, have watched helplessly as the real estate crisis has pushed their home values to as little as 25 percent of what they paid for them less than a decade ago.

The report continued, “Given the sheer number of potential homes for sale and the weak pace at which demand is trending, the bottom of the housing market may last another three to four years, during which annual appreciation may reach only as high as inflation or income growth, meaning real asset values will remain unchanged or lower throughout this period.”

The shadow inventory includes all loans behind by 90 days or more, already in foreclosure, as well as a large majority of loans that are 30 to 60 days delinquent and about to be in foreclosure. Morgan Stanley even includes a portion of current loans expected to eventually default.


Considering that, as of March 2010, approximately 7.5 million, or 15 percent of borrowers, had fallen behind—with the above-mentioned 8 million still to come—the bankers and realtors have not even reached “half time” in the predatory economic “game.” It takes place on a rigged playing field ultimately run by the shadowy private central bankers and their cohorts in commercial banking, wielding their debt-based monetary and crooked financial system against the middle class.

Adams noted that firms besides Morgan Stanley are trying to measure the shadow inventory. Barclays Capital predicted that it would peak at 4.7 million in the summer of 2010. Capital Economics, a research firm, predicts that the shadow inventory could reach 5.5 million by the end of 2011. Thousands of people remain in their homes after banks have attempted to foreclose on them, because many banks do not have original titles on the homes due to the bundling and securitization of mortgages.

Pat Shannan is a contributing editor of American Free Press. He is also the author of several videos and books including, Everything They Told Me Was A LieOne in a Million: An IRS Travesty and I Rode With Tupper, detailing Shannan’s experiences with Tupper Saussy. They are available from FIRST AMENDMENT BOOKS ($25 each). Shannan’s latest book, Everything They Ever Told MeWas a Lie (softcover, 300 pages) is available for $30 plus $5 S&H. Call AFP/FAB at 1-888-699-NEWS toll free to charge to major credit cards.