Bank-owned (REO) inventory has decreased about 40 percent over the past in the past year and a half and continues to decrease despite a recent uptick in foreclosure starts. More than 109,000 U.S. properties started the foreclosure process in May, a 12 percent increase from the previous month and a 16 percent increase from May 2011 — the first annual increase in foreclosure starts since January 2010. Still, REO inventory continued to decline in May, down 5 percent from the previous month and down 31 percent from May 2011. So where have all the REO homes gone? They are hiding beneath one of three probable shells: Complete Story