In the wake of yesterday's encouraging news that home sales in Minnesota rose during the first two months of the year comes two housing reports that offer a reality check.

The first is from CoreLogic, which offers encouraging news. The group says that the 90-day delinquency rate in Minnesota fell almost half a percentage point in December, an indication that the overall foreclosure rate is likely to fall in the coming months. At the same time the overall foreclosure rate in the state rose .33 percent, a sign that the number of distress sales coming to the market is likely to level off. The state's foreclosure rate that month was 2.06 percent, well below the national average of 3.58 percent. Just shy of 1 percent of all homes with a mortgage in Minnesota were owned by a bank.

What happens next depends on how many foreclosures have only been delayed by lenders in the wake of the robo-signing debacle. And will loan-modification and foreclosure prevention programs continue to be effective?

Despite the declines in foreclosures, the National Association of Realtors (NAR) says that in Minnesota there are still nearly 33,000 houses either in foreclosure or in delinqency that have not yet hit the market. NAR estimates that at the current sales pace that inventory will last 10 months. Relatively speaking, the situation in Minnesota isn't as bad as it is elsewhere. Shadow inventory is expected to last 51 months in New Jersey, 32 months in Utah and and 38 months in New Mexico.

The report offers more evidence that the worst of the foreclosure crisis remains concentrated in four states: Arizona, California, Florida and Nevada, accounting for 42 percent of all foreclosure inventory. The shadow inventory in Florida exceeds 440,000 units, while California has more than 225,000 units and Illinois has 121,000 units.

What's the upshot? The report is just more evidence that while mortgage delinquencies have fallen during recent quarters, the distress that results will continue to have a serious impact on the market for some time to come.

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