Is Shadow Inventory Bad?

I have read several stories in the last month from organizations like RealtyTrac and others that they estimate that banks own another 3 million homes nationwide that are NOT on the market to be sold yet. This inventory is called shadow inventory and is widely considered to be bad news. Why? This further supply of homes will drop real estate prices lower is the expectation or it will cause the housing recovery to be slower.

But, let's look at the Denver market. Most "experts" think that banks own about 13,000 homes in shadow inventory currently in the Denver area. I would guess that half of those homes are worth $200,000 or less.

According to the local MLS data there is fewer than 3 months of unsold homes on the market priced under $200,000 here in Denver currently. And I would bet a large majority of those homes are short sales that most buyers don't have the patience to wait for.

In fact, over the last 6-8 months most of my clients buying homes under $200,000 have gotten into bidding wars on homes that are not short sales because there is so little inventory available.

Thus, it would be GREAT NEWS if the banks were to release to the market 1,000 or 2,000 of these homes every month in my opinion. What do you think?