Short Sales are on the rise taking up about 8% of the inventory. In 2008, they were about 3% of total sales.
They sell at about 21% discount, which is HUGE. So, if you have the time, patience and ability to walk away, these are a great deal.
They are decreasing home values. Because there are so many of them, appraisers have to take them into consideration. If I was thinking about selling, I would do it now and get in front of the short sales and foreclosures (shadow inventory) to come.