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Lindley Estes is a business writer for The Free Lance-Star and This blog is on Fredericksburg-area business. Send an e-mail to Lindley Estes.

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This week’s investing column (7/11)

CONVINCED that the housing market has turned a corner and is back on track for steady gains?

If that’s your opinion, and you want to keep it that way, don’t go anywhere near the research of Mark Hanson.

Hanson is a real estate analyst who runs the eponymous firm Mark Hanson Advisors, which is attracting ample interest from financial media. In addition to providing housing-related research to paid clients, Hanson writes a blog about real estate that can be found at Interested parties can also sign up for a free e-mail newsletter.

Unlike many people who say housing has hit a bottom and is on its way back up thanks to lower prices and mortgage rates, Hanson remains convinced that the market still remains far from healthy.

Hanson’s latest blog post makes the case that most of the demand over the past couple of years has come from first-time home buyers attracted by the $8,000 federal tax credit. Now that the credit has expired, Hanson wonders where the demand will come from and worries about the possible downward pressure on prices.

He makes the case that an increase in foreclosures would actually be a good thing for the market. They are what’s most in demand by prospective buyers.

There’s no shortage of candidates for foreclosure, Hanson shows. There are millions of outstanding mortgages on which payments aren’t being made but that have not moved into foreclosure– a number often called the shadow inventory. That’s in large part due to political pressure on banks not to foreclose on struggling homeowners.

Hanson thinks just the opposite–that a growth in foreclosures would help clear the pipeline of distressed mortgages and increase demand from buyers.

He makes the case that if foreclosures double from present levels, it will take three or four years to clear the existing inventory of distressed properties. If levels remain the same, it will take eight or nine years.

Despite the political rhetoric, Hanson thinks efforts to modify mortgages have mostly just created a large group of “distressed homeowners in the pipeline that over time will be liquidated.”

Some banks are starting to increase the pace of foreclosures on hopelessly distressed mortgages, Hanson writes, and he encourages more to do the same.

As we warned from the start, this is not the type of opinion that many housing bulls care to consider.