Recent reports of home prices rising slightly appear to show that the housing market has reached its bottom and begun to stabilize. But analysts warn the apparent stabilization is largely due to fewer foreclosures hitting the market because of servicing backlogs, which means there is a growing shadow inventory of delinquencies that have yet to complete the foreclosure process. The pace at which these properties are are put on the market will determine the affect they ultimately have on housing prices. And at the current sales pace, which threatens to be the slowest since 1996, excess supply could far outweigh demand and drive prices down further. According to Altos Research’s vice president of data analytics, Scott Sambucci, the weight of the shadow inventory will cause prices to drop through the end of the year and begin 2011 lower than the were in 2009. Estimates as to how long it’ll take to work through the excess inventory vary. Teunis Brosen, an economist with ING Bank, believes it’ll take 2.5 years to work through the supply, while Morgan Stanley estimates it’ll take closer to four years to clear. More here, here, and here.