The shadow inventory is one of the more important, albeit least covered, aspects of housing.

A quick glance through the news feeds these past couple weeks yields many good developments for the housing market. Along with improved residential construction numbers, strong local sales and a rebound in consumer confidence, there were huge jumps in multifamily originations, massive additions to key indexes and even optimistic trends for mortgage insurers.

Lying on the outskirts of such positive stories, though, is the shadow inventory, a vast collection of off-the-market properties that give some analysts pause when assessing the true scope of a housing recovery.

As reported in a recent Time magazine piece, an easy way to think of shadow properties are homes that should be for sale, but for various reasons, are not. It could be an REO property; or in some state of foreclosure; or maybe, the homeowner is withholding the home until prices recover.

Because of the hushed manner in which many shadow properties are handled, it is impossible to deduce how many such homes actually exist, though some there are estimations. The U.S. Department of Housing and Urban Development’s latest scorecard put the shadow inventory at 3.6 million units, but that total only included defaulted homes with Fannie Mae and Freddie Mac loans. According to a Wall Street Journal article cited by Time, there could be up to 10 million shadow inventory houses.

Whatever the number of shadow properties that exist and whatever reason for their shadowy demeanor, such homes often remain in that uncomfortable position for months if not years, often to the detriment of prices for neighboring properties (especially in the case of vacant REOs).

And prices are the biggest fear going forward for analysts, as Time pointed out. The latest Case-Shiller, which was released last week, showed a 3.7 percent drop in year-over-year home values for November 2011, and CoreLogic’s Home Price Index showed overall values in 2011 dropped by 5 percent. Such declines in value will not stabilize until all of the distressed homes in the shadow inventory are effectively worked through the system and sold, and that is a process that could take some time.

Dire circumstances aside, though, it’s not as though the Obama White House is sitting idly by while shadow properties lie dormant. In addition to expansions of the Home Affordable Modification Program, an all-new mortgage refinancing program and forbearance initiatives at top GSEs, the Federal Housing Finance Agency has begun pre-qualification rounds for investors to purchase, in bulk, many of the governments 250,000 REO properties, homes that are undoubtedly part of the shadow inventory.

So though the shadow inventory looks formidable, steps are being taken to confront its ill effects.