Efforts to revitalize the housing market will all go to waste if problems with real estate inventories are not addressed immediately, experts warned.

According to Radar Logic, the glut of foreclosures and an oversupply of housing could drag down real estate prices in the later part of the year. It added that excessive inventories could hamper the recovery of the housing market.  “Given the unprecedented number of homes in default, foreclosure, or REO (real estate owned) inventory, and barring some unforeseen exogenous boost to housing demand, the price stability we saw in 2009 will likely come to an end in the second half of this year,” the research firm said in a report.

The firm also revealed that the number of real estate owned properties continues to grow by the day, with the national REO inventory reaching more than 478,000 homes.  According to Radar Logic, Fannie Mae owns 23% of the inventory, while its sibling company, Freddie Mac, owns 11%. The Department of Housing and Urban Development, on the other hand, has a 10% share of the inventory.

In addition, while the latest figures from the Department of Treasury showed a decline in the number of late mortgage payments, Radar Logic pointed out that the volume of distressed properties are still growing due to the high failure rate of loan modifications. It believes that the latest trend could point towards another surge of foreclosures in a housing market plagued by poor new home sales and low applications for home purchases and refinancing.

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