fact, foreclosures alone are on pace to hit about 4 million units this year – after more than one million foreclosures in the third quarter alone. “Repossessed” homes are on pace to add roughly an additional half-million “distressed properties” to this inventory. I'm unaware of any aggregate statistics on “short sales”, but as a favored choice for both homeowners and banks (versus the alternative of foreclosure), these also obviously total in the hundreds of thousands (at least).

Thus, as I reported in a commentary on the U.S. housing sector about six weeks ago (see “U.S. foreclosures/repossessions on track to hit 5 million in '09”), the total amount of “distressed properties” in the U.S. - generated in just this year – is roughly 5 million units. With U.S. banks on pace to sell about 1.5 million distressed properties this year, this leaves 3.5 million additional units which are being added to the inventory of empty/unsold homes in the U.S.

What this means is that U.S. banks by themselves are holding as much inventory (from just this year) as Yun claims exists in the entire U.S. housing market. Put another way, the only way in which the NAR's “inventory” number would have any validity is if not one, single U.S. homeowner had a home listed for sale.

Returning to the real world, 25% of U.S. mortgage holders are “underwater” on their mortgages, with more than 10,000 additional U.S. homeowners entering the foreclosure process every day – and millions more homeowners only a (missing) paycheque away from joining that category. In other words, there are millions of highly-motivated sellers – easily surpassing the 3.5 million housing units which U.S. banks have added to their existing inventory of unsold homes.

Keep in mind that U.S. banks have been accumulating empty/unsold properties for roughly two years – as “distressed sales” have never kept pace with the rate at which banks are accumulating these properties since the U.S. housing collapse began. A conservative estimate is that they are currently holding roughly 5 million empty/unsold units – equal, by itself, to a year's worth of consumption.

Add to that the millions of U.S. homeowners desperate to sell in order to avoid foreclosure, and the return of large numbers of speculators to this market and this represents at least another 5 million units of inventory – since speculators don't buy-and-hold houses, but rather put them back on the market (either immediately, or after some cosmetic changes).

As a result, none of these speculator-purchases remove any inventory from this market. True, in theory, speculators can rent-out the homes they purchase. However, with U.S. housing vacancies already at their highest level in 23 years and still soaring higher (see “Rising U.S. vacancies mean ALL real estate going DOWN”), the combination of crumbling rental prices and huge over-supply means that any speculator foolish enough to become a “landlord” rather than simply trying to “flip” properties is doomed to be just another foreclosure victim.