In April the Shadow inventory of distressed properties in theUS housing market hit a new low that paralleled the decline in for sale inventory. Shadow inventory is defined as properties seriously delinquent by 90 days or more, in the foreclosure process, and those that have finished the foreclosure process and become REO (real estate owned) but have not yet been listed for sale.
Meanwhile, the unsold inventory of non-distressed active listings fell to 1.5 million units in April — a more than five-year low.
Shadow inventory peaked in January 2010 at 2.1 million units, and has fallen by 28 percent. A shrinking shadow inventory is great news for the real estate market , as these distressed homes have a very powerful downward push on all home prices. This is one of the reasons why some markets that were formerly identified as deeply distressed, like Arizona,California and Nevada, are now experiencing price increases.