In the tough seller's market of the last few years a lot of sellers have tested the waters by putting their house up for sale, and, in the end, retreated. All those houses that will theoretically come back on the market when the market improves are called shadow inventory.

We're looking at two basic kinds of shadow inventory. The first is individual owners. They want to sell, maybe even already tried and are just waiting for the right moment to put their home on the market.

The second kind of shadow inventory is foreclosure inventory. The banks are reportedly sitting on 600,000 homes nationwide that they've already foreclosed on, but aren't yet putting on the market.

Both of these categories have the potential to dramatically increase inventory, which has been steadily dropping for at least a year now.

The thing is, I'm not overly worried and I think the danger has been exaggerated.

Yes, there are a lot of homeowners who still want to sell. But it's not just the low number of sales that keep them from trying. They also don't want to sell at these prices. And, if they're going to wait for prices to recover even a quarter of what they've lost, I think they're looking at waiting several years. Some of those homeowners will have changed their mind by then. They'll remodel the house to suit their needs and they'll stay. Those that do still sell will not do so in one huge mass. Some will have a higher tolerance for lower prices and will sell sooner. Others will likely wait a year or two or three. I don't believe there will be some magical month where all this "shadow" inventory pops onto the market at once.

The foreclosure properties are a bigger concern. But I'm still not convinced it will be a huge problem. A lot of those 600,000 homes will be in CA, FL, NV and MI, places hit harder than we were. So, the numbers will likely be smaller than people anticipate. Secondly, the bulk of these are likely to be at the lower price ranges. We've actually got a shortage of inventory at those price levels. In places like Prince William County and even Culpeper County, a lot of inventory would be absorbed very quickly by first time buyers. And, I believe the banks are deliberate spreading out the foreclosures in order to manage their losses. It's not in their interests to dump everything on the market at once.

So when someone tries to scare you with all the shadow inventory waiting to hit the market, take it with a grain of salt. It may not be all that bad!