One firm specializing in real estate research and analysis is not pulling any punches: Altos Research says that home prices are set to tank. In fact, according to a recent report released by the firm, home prices at the start of 2011 will actually be lower than they were in 2009, thanks to a massive drop in the number of able home-buyers and a similarly dramatic spike in the amount of available housing, thanks to the influx of the much-touted “shadow inventory” into the real estate market[1].

However, the firm, which specializes in local inventory analysis, emphasizes – perhaps not surprisingly – that “recovery period is dependent on inventory [and] it’s important to get local.” For example, the report indicates that San Diego, CA and Las Vegas, NV should actually remain pretty stable in the coming months, while Chicago could be set to tank. These discrepancies are due to discrepancies in the shadow market volumes and predicted buyer behaviors in these areas.

Morgan Stanley estimates that the national shadow inventory could be greater than 7 million properties, while Standard & Poor estimate that the aggregate balance of the loans on those properties could come in near $480 billion. Does your preferred investing area have a high shadow inventory volume? Would you target areas that do for investment purchases?

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