Shadow inventory does not exist in Arizona. It is primarily in the judicial foreclosure states. It takes up to 3 years to foreclose on property in the slowest of those states. So you have a build up of inventory coming to the banks. In Arizona it only takes 90 days to foreclose on a home. So we have been through the inventory.
In fact, 4 years ago at the end of March, we had 55,000 homes on MLS for sale. 3 years ago it was down to 35,000 homes. 2 years ago it decreased to 32,000 homes. Today it is under 10,000 homes available on MLS for sale. That is everything. Bank owned, short sales and traditional sales. A price neutral market would have around 30,000 homes. Less than that and you have upward pricing pressure or a "seller's market".
The result is the median price of a home in the Phoenix metro area has risen 25% from August of 2011 to today. This is from the absolute bottom of the market. It is still approximately 10-15% below the duplication costs of a builder.
Last: Wells Fargo, Chase Bank and B of A had a meeting with 600 Realtors in the early spring of this year. They were asked point blank if they were holding any inventory back. The said they are releasing the homes they own as soon as they get them.
It will be some time before builders can catch up to demand. Primarily because no one has been developing lots for them to build on and they are running out of inventory.