Is an oversupply of housing units the real reason that America is suffering from low prices? Is the glut is so serious that it will plague local housing markets and depress home values for a number of years to come?

A new analysis from the senior economist at CoreLogic makes the case that declining household formation, vacant REOs and the shadow inventory of defaults and foreclosures in process together have created an oversupply of 1.1 million homes that is negatively impacting prices and will continue to do so for years-as long as it takes to reduce excess supply to levels that will not impact local values.

“Excess supply is important because it has implications for residential investment and therefore heavily impacts economic growth and home prices,” said CoreLogic’s Sam Khater in The MarketPulse, a new newsletter published by the data provider.

Khater argues that the net increase in housing units increased by an annualized 1.64 percent rate during the last five decades while household growth slowed from 1.54 percent to only 1 percent during the 2000s, and reached its rock bottom in 2008 and 2009 when household growth only averaged 0.5 percent. The decline reflected several factors: more women in the workforce, delayed marriage, lower formation rates for younger households and the recession.

Given the net increase in the supply and household growth between April 1, 2010 and November 2011, Khater estimates that the excess supply was roughly between 1.0 and 1.1 million units as of November 2011. Projections of roughly 600,000 net new housing units annually and an REO supply of 400,000 units a year will exacerbate the gap between supply and demand.

“It will take many years for the excess supply to be removed assuming no large policy intervention and the economy continues to grow slowly,” said Khater. “A large caveat to this estimate is the potential for policy intervention because, absent the REO supply, the excess supply would rapidly decline.”