by Calculated Risk on 2/23/2007 12:28:00 PM

From the Chicago Tribune: Canceled contracts masked glut of homes, economist says

Housing analyst David Seiders told Chicago-area builders Thursday that the federal estimate of 3.5 million homes for sale at the end of 2006 is "grossly understated."

"There is a big inventory overhang out there, and it's bigger than anybody understands," he said.

In an annual forecast on the local industry in Addison, Seiders, chief economist of the National Association of Home Builders, cited the high level of sales contract cancellations in 2006. It created a snag in the recordkeeping, so many homes marked as sales in government data ended up back on the market too late to be counted as inventory, he said.

"Cancellation rates more than doubled between the end of 2005 and the end of 2006, meaning that net sales for the year nationally may be down 65 percent."

Caroline Baum reported on this issue last September: Think Housing's Stabilized? See Cancellations

Of course Seiders thinks the bottom is near:

But Seiders was not all gloom, saying the market is probably at the year's low spot right now. He expects slight improvement at midyear.