Studies keep showing what we have known for a long time: Fighting foreclosures is a futile — and counter-productive — use of resources.

New studies by John Burns Real Estate Consulting and Standard & Poor’s Financial Services conclude that loan mod efforts only serve to delay the inevitable, resulting in future foreclosures.

The credit bubble allowed home buyers to get in over their heads, to buy more house than they could afford. Once prices came down and the refi pipeline closed down, it was game over for many of these buyers.

The latest estimates are for another five million delinquent mortgages to go through foreclosure (or alternatively, short sales) over the next few years. Currently, there is an estimated 7.7 million households in some stage of pre-default delinquency.

Thus, whatever grudging progress that has been made in clearing out some of the excess housing inventory will likely suffer a set back as these 5 million homes come out of the shadows and enter the real estate inventory of homes of for sale.

5 million homes represent approximately one years sales.

The WSJ reports that the problem is “largely concentrated in Arizona, California, Florida and Nevada. The shadow inventory is equivalent to 27 months of sales in Orlando, 24 months in Miami and 18 months in Las Vegas.”

Here’s the WSJ:

John Burns, chief executive of the consulting firm, said investor demand for foreclosed homes remained strong. Thus, he said, prices were likely to be about level over the next few years, despite the looming foreclosure supply, if the economy continued to recover and mortgage interest rates didn’t rise sharply. But if the economy slumped anew and interest rates jumped, he said, “that’s going to cause prices to fall further.”

The S&P study also says that the “overhang” of foreclosed homes expected to go on the market points to lower home prices.

Some borrowers are catching up on payments after having their loan terms modified, but S&P says current trends suggest that 70% of such borrowers eventually will redefault.”

As noted in Bailout Nation, there is a virtue to foreclosures — it helps drive over-priced homes towards normal levels, increases sales, and removes the prior excesses from the market.

Its not pretty or pain free, but it is a necessary part of recovering from a bubble