Boston housing market has 5-year shadow inventory

Friday, January 7, 2011, 2:07pm EST

A new report by Standard & Poor’s indicates the Bay State’s housing market has a way to go — say, another five years — before the after effects of the ongoing downturn have run their course.

The credit-ratings firm said measurements of so-called “shadow” housing inventory remain at distressing levels, both nationally and among many of the country’s largest cities, including Boston. All told, S&P said some $450 billion in mortgage debts are linked to these properties, considered distressed but not yet officially listed for sale. Examples of homes included in S&P’s shadow inventory are properties with debts that are 90 days or more past due as well as homes that are in some point in the foreclosure process.

With roughly $7 billion in distressed mortgage debts outstanding as of Sept. 30, Boston’s shadow inventory will likely take 62 months to clear. That timeline expanded from 60 months at the end of June and from 54 months at the beginning of 2010, according to S&P.

Nationally, the country’s shadow inventory stood at 44 months — or 3.5 years — at the end of the third quarter. Los Angeles had a shadow inventory of 178 months, or 14.8 years — the highest in the nation. New York’s inventory was 119.5 months, or 10 years. Miami, at 59 months, was the only top 20 city to see its shadow inventory shrink in the third quarter, according to S&P.

On a related note, CB Richard Ellis predicted in its annual market-outlook report that Massachusetts home prices will fall roughly 11 percent this year. That prediction was based on data provided by The New England Economic Partnership.

Boston Business Journal – by Craig M. Douglas