There's more evidence that the housing market is likely to get worse before it gets better. A new study reports that the number of houses that are in foreclosure or are bound for it is increasing dramatically. As of August this "shadow inventory," which includes all distressed sales not yet on the market, has grown 10 percent since last year and will continue to lurk through the market for some time, according to CoreLogic, a real estate research firm.

Analysts are keeping a close watch on how many distressed sales are in the pipeline because of the effect they have on home prices throughout the market. Foreclosures put downward pressure on prices because they can be immediate competition for traditional listings, and they often become comparables when appraisers are trying to determine the value of a property. Plus, bank-owned listings are often boarded and untended, making nearby houses seem less desirable.

Mark Fleming, CoreLogic's chief economist, said "weak demand for housing is significantly increasing the risk of further price declines in the housing market."

The problem is that because sales aren't keeping pace with new listings, overall inventory levels are rising. In the Twin Cities, for example, inventory levels were up 10.4 percent as of Nov. 13 compared with a year ago, according to a report released Monday by the Minneapolis Area Association of Realtors.

Nationwide the "visible supply" of houses on the market -- those currently listed -- rose from 11 months a year ago to 15 months in August. By combining the visible and shadow inventory, the overall supply of unsold homes nationwide rose to 23 months from 17 months a year ago.

The market is considered at equilibrium when there's a six- to seven-month supply.

When comparing the supply of listings for houses that are 90 days or more delinquent with the current sales pace, Minnesota ranked 13th nationwide, beating out even Michigan and several other states with metro areas that are worse off than the Twin Cities.

Those rankings, however, are an indication not of the overall health of a market but a reflection of how quickly lenders are disposing of listings.

Jim Buchta • 612-673-7376