Whereas the number of excess single-family homes is only slightly higher than during the 1990s and about 75% of the average annual production level in the 2000s, the story is grimmer on the multifamily side. The excess vacant stock of 125,000 units is about three times the average annual production during the 1990s and some 10% more than the biggest single year of new construction in the 2000s.

Overall, from 1999 to 2005, production levels kept relatively at pace with sales activity and absorption. However, sales slowed significantly in early 2006, while completions remained high, adding to the supply. "In the last several quarters, new sales seem to have stabilized and completions have finally slowed to that level," says Obrinsky. "But this only means that the excess inventory isn't getting larger, not that it is diminishing yet."

The situation is in fact decidedly less upbeat, since contracts struck for those units could fall apart. "The Census Bureau doesn't track cancelled sales contracts, so we don't have an estimate of just how large this phenomenon is at present," Obrinsky states. "But it does mean that new construction probably still exceeds sales." However, the VP concedes that no information is yet available on sales of new multifamily owner-occupied units, so there's no clear way to come up with similar estimates for the for-sale apartment inventory.

In addition to the extra housing units coming on line, there are also those existing residences that are unsold. "On average, the inventory of existing single-family homes and condominiums for sale has been equal to about six months' worth of sales. The inventory for the three most recent months is close to 11 months' supply," points out Obrinsky.

That results in about 4.4-million units, considerably higher than at any time before 2007. Broken down, that's 3.8-million units, or 10.5 months worth of inventory for single-family homes and 675,000 units, of 12.8 months of supply of condos.

At the current sales pace, 293,000 condos--based on six months of supply--would constitute a normal level, so there are 382,000 extra condos on the market. Likewise, the normal available single-family inventory would be about 2.2 million, leaving 1.6-million excess units.

"All of that results in a total estimated inventory of excess existing houses and condos of about two million units, which is twice as large as the excess vacant inventory," says Obrinsky. "Of course, many households who are pessimistic about selling their homes have taken them off the market, but any upturn in sales will likely find more of these homes put up for sale again."

No doubt the excess supply of housing is pushing rent growth and prices down in the market. While the restraint on the part of builders has helped, he says, a considerable improvement in the market requires a significant absorption of the available inventory, which will take at least a couple of years.