People who are worrying about mortgage delinquency rates should remember that foreclosures did NOT create the huge excess supply of 2006. The excess supply arrived 2 years before the foreclosures started in earnest. When the bank owned homes hit the market, it was already dreadfully over-supplied, so their prices dropped sharply. If we saw a new wave of distressed homes right now, they would be soaked up very quickly by eager buyers and prices would continue to rise.
It would help move the market back to a more normal balance, so prices would rise at a more moderate pace. Most distressed homes would be unlikely to get to foreclosure because almost all of them have substantial owner equity and can be marketed as normal sales, or at worst pre-foreclosures, not short sales (which can often be tricky to close).