Shadow Inventory May Stall Real Estate Recovery 18 to 103 Months

Shadow inventory is real estate to sell that we don't yet know about. It's made up of homes that soon will be on the market, but not for the usual reasons.

It includes homes that are usually several months in arrears on their mortgage and about to hit the foreclosure circuit; homes that are 90-plus days delinquent and currently languishing in foreclosure; or bank-owned (REOs) that have not yet been put on the market. But come on the market they will, one way or the other, and at greatly discounted prices – distressed or short sales.

These houses will keep our values flat as long as they exist. How?

Take Neiman Marcus: Let's say you put a discount designer-fashion outlet smack next to Neiman's couture -- if everyone can buy Ralph Lauren and Escada at half-price, they sure won't pay full price at Neiman's.

Neither will homebuyers.