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Recently, there have been lots of positive signs coming out of the real estate market. Foreclosure rates are down, housing starts are up, and homes have appreciated in value in some markets for the first time since 2006. Even so, two reports surfaced last week indicating that, for the nation as a whole, home prices dropped by 3.5% to 5% in 2011. And one factor hurting the prices of homes that are for sale is the enormous number of homes that aren’t for sale — but that should be.

The Case-Shiller housing index was released last week, stating that home prices had dropped 3.7% in 2011, compared with the previous year. CoreLogic, a real estate research firm, also recently released a report estimating that prices had dropped in 2011 — by 5%.

“While overall prices declined by almost 5% in 2011, nondistressed prices showed only a small decrease,” said Mark Fleming, CoreLogic’s chief economist. “Until distressed sales in the market recede, we will see continued downward pressure on prices.”

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Most housing experts agree: prices won’t rise until all distressed inventory (a.k.a. foreclosures and short sales) is moved through the market. Distressed sales keep prices low because banks want to get rid of such properties asap, and they’re willing to sell at a loss so long as the homes are out of their hands.

Exactly how many foreclosures need to be cleared out of the system is somewhat unknown, however. While about 3.5 million homes are officially for sale at any particular time, millions of homes that otherwise would be for sale are currently off the market. It’s these properties that are known as “shadow inventory.”

There are many reasons why homes that could be for sale aren’t. Some are stalled in the foreclosure process, which can easily take more than a year in some states. Some banks decide against putting certain homes on the market either because they can’t process all their distressed inventory, or because flooding the market would drive prices further down. Technically, shadow inventory also refers to homeowners who would like to sell but are waiting for market conditions to improve.

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How much shadow inventory exists? No one knows for sure. Yesterday, the U.S. Department of Housing and Urban Development released the January Scorecard, which reported that the number of homes left off the market decreased from 3.9 million units at the beginning of 2011 to 3.6 million at the end of the year. These figures include homes that defaulted through a Fannie Mae or Freddie Mac loan. While lenders who participated in such loans are required to report data regarding how much inventory is left off the market, other lenders are under no such obligation. Therefore, it’s difficult for housing analysts to estimate just how much shadow inventory is out there at any given time. According to the Wall Street Journal, the number could be anywhere from 3 million to 10 million homes.

About 4.4 million homes were sold in 2011, according to Bloomberg. There are about 3.5 million homes on the market now, and if you were to add millions and millions of shadow inventory homes into the mix, it would take years to sell all these properties to get to a point where the market was “normal.”

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The Administration recognizes that distressed inventory is holding back the housing recovery and has made efforts to minimize the number of homes facing foreclosure. Recently, the Home Affordable Modification Program was expanded so that more underwater homeowners would qualify for assistance. President Obama is pushing a mortgage-refinancing program to allow homeowners to reduce how much principal they owe, and the Fed recommended that lawmakers enact a government-sponsored program to rent out foreclosed properties. Owners who defaulted on their loan could potentially rent their old homes, which might otherwise be sold by the banks at a loss or fall into the category of vacant shadow inventory. Fannie Mae and Freddie Mac have also revised their forbearance program that will allow owners who’ve lost their job to opt out of paying their mortgages for up to a year.

It’s hard to gauge which, if any, of these programs will make much of a difference in the housing market. Considering the staggering amount of distressed homes and shadow-inventory properties around the country, there really is no quick-fix solution — and likely, no way that housing prices are going to rebound substantially in the near future.

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