CoreLogic Inc. said the so-called shadow inventory represented a five-month supply at the current sales pace. The inventory's size is a barometer of housing-market health because foreclosed homes sell for lower prices and falling values discourage buying, said Sam Khater, CoreLogic's chief economist.

"It's showing there are improvements in some segments of the market," he said in a phone interview from McLean, Va. "It doesn't mean housing distress is over, but it does show that the pipeline of distress is beginning to ease."

Mortgage delinquencies fell to 8.32 percent in the first quarter of this year, down from a record 10.1 percent in 2010's first quarter, the Mortgage Bankers Association reported May 19. The number of homes with mortgages at least 90 days late dropped to 1.96 million in April from a January 2010 peak of 3.06 million, Lender Processing Services Inc. reported June 1.

Foreclosures and short sales, in which the lender agrees to a sale for less than the balance of the mortgage, accounted for 31 percent of existing-home sales in May and 37 percent in April, the National Association of Realtors said Tuesday. The share is about 5 percent in a healthy market, Khater said.

There was a 9.3-month supply of homes listed for sale at the annual sales pace of 4.81 million in May, down from a peak of 12.5 months in July of last year, the group reported.

Foreclosure filings fell to their lowest pace in almost four years in May as banks delayed processing defaults while they rework documentation procedures following claims they improperly seized homes, according to Irvine, Calif.-based RealtyTrac Inc., a real estate information service.

Other shadow inventory estimates are higher. About 3.8 million U.S. homes are "vacant and held off the market," Assistant Treasury Secretary Mary Miller said this month. Rick Sharga, senior vice president of RealtyTrac, told Bloomberg Television on Tuesday that the number might be as high as 5.7 million.