While the shadow inventory and a clogged up foreclosure pipeline present challenges, if the economy improves to the point where the labor market begins to seriously recover, it should be possible to overcome those obstacles in the medium-term.
With unemployment remaining stubbornly high, a massive inventory of homes stuck in the foreclosure pipeline of many big banks, and gas prices pushed up by record oil and commodity prices, economists are beginning to revise their economic forecasts and are questioning how much longer the consumer can continue to bear the current environment. (Read Analysts Slash Jobs Forecast Amid Weak Data).
"From late 2012 we believe the sector's structural issues rising levels of unsold inventory due to robust launch schedules coupled with a formidable pipeline of completions will continue to depress rents and capital markets, " said David Lum, an analyst for Daiwa Capital Markets, in a recent report.