Any discussion about house prices ends up dwelling on the "shadow inventory"--the backlogs of houses that really need to be sold, but nonetheless aren't on the market.  There are the owners who want or need to move, the banks who are too overwhelmed to foreclose on everyone who's behind, and the bank-owned houses that haven't been put on the market yet because what's the point when there are four other foreclosures for sale on the same block?  As prices tick up, those houses will be put on the market--which will, of course, depress prices again.


Our own Dan Indiviglio reports that the shadow inventory may be shifting towards real inventory:
Foreclosures are speeding up again. For three straight months through December, foreclosure activity had declined as banks worked to refine their procedures and documentation. In January, however, foreclosure activity increased by 1.4%, according to foreclosure tracker RealtyTrac. The delays might not be completely over yet, but they may be starting to abate.



Bank repossessions drove the increase in activity, up by 11.9%. At 78,133, they were the highest since October. Yet default notices and auctions both continued to decline in January, down 0.7% and 3.7%, respectively. So the increase in seizures was large enough to overshadow the declines in the other two stages of foreclosures.The bright note of the dismal foreclosure uptick is that the faster we work through the shadow inventory, the faster we find the bottom and can start making some rational decisions again.

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