It’s called the “shadow inventory” and it’s scarier than a ghost because it is very real. It’s hanging over your local real estate market ready to ambush property values at the first sign of a rebound.

Most of the attention on the shadow inventory has focused on a glut of foreclosed properties, as many as 600,000 according to the CEO of RealtyTrac, that have been possessed by lenders but haven’t made it to market. Whether the “foreclosure shadow” is real and a cause for concern is a matter for debate. In any case, it is only a fraction of the size of the hidden shadow inventory caused by pent up supply.

For two and a half years millions of homeowners have been putting off selling their homes because the market has been so bad. Many simply cannot afford to sell because they are underwater on their mortgages. These are families in need of more space, empty nesters moving into smaller digs or renting, retirees, second homes, investment properties, estate sales-virtually any sale that can be delayed.

The shadow inventory continues to grow as sellers bide their time. Now it has reached levels so significant-according to our rough calculations-that a flood of fresh, unexpected inventory as prices improve, checking price appreciation and even destabilizing local markets temporarily.

When the shadow inventory begins to come out of the closet, two factors will ease its impact on local markets. First, the flood will not occur all at once. Its impact will be spread over a matter of months; so too will its dampening effect on prices. Many sellers simply cannot afford to sell until prices get to a certain level. As prices improve, sellers will create small waves of new inventory that will have the effect of leveling price increases, creating a recovery that is more stair-shaped than “V”-shaped.

Second, most sellers will become buyers and add to local demand, buying up houses sold by other shadow inventory sellers.

A survey last fall by Move, which operates Realtor.com, provided an early warning sign as to the size of the shadow inventory. More than a third, 36 percent, said they or someone they know has delayed selling a home because of the market.

More recently Zillow examined this issue in greater depth in a survey released May 14. (See Homeowners Accept Reality.) It found that a significant number of potential sellers are holding back due to the current market. When asked about future plans to sell, 31 percent of homeowners said they would be at least “somewhat likely” to put their homes on the market in the next 12 months if they saw signs of a real estate market turnaround-and many see that turnaround coming. About two-thirds of homeowners believe home values in their local markets will increase (26 percent) or stay the same (37 percent) over the next six months.

To get a rough idea of the size of the shadow inventory, consider the decline in listings on the nation’s MLSs. Since the bust started in the fall of 2006 and prices declined for the first time in history, sellers with the option of postponing their sale have done so. The number of existing homes sold has fallen from 6.5 million in 2006 to 4.5 million today-a decline of about 31 percent. That’s a deficit of about five million properties in two and a half years and counting.

Though sales were down, listing inventory rose. Since 2006, total listing inventory on Realtor.com, the nation’s largest search site, actually increased. Listings rose from an average of 2,736,737 in 2006 to 3,681,650 in January 2009, a 34 percent increase. Realtor.com also experienced growth in the number of MLSs feeding listings into its database during that period.) While many sellers were avoiding the market, those who had to choie but to sell saw their properties languish, forcing prices down.

No one really knows exactly how big the shadow inventory will be when prices stabilize. However, taken together, total fall in MLS inventory in recent years and the two survey findings suggest that as many as one third of the nation’s 70 million homeowners would like to sell but have delayed taking action. At least five million homeowners would like to sell as soon as they can. That’s the equivalent of an entire normal year’s worth of new and existing home sales.

For brokers and agents, the shadow inventory of local properties will be a windfall. Now is the time to check in with old customers and ascertain their plans. If they are among the third of owners waiting to for conditions to improve before they sell, they may be anticipating that time to come sooner than we think and decide its time to talk to a professional.

For those anticipating the real estate recovery, the shadow inventory is one more reason recovery won’t be simple, pretty or quick. Prices will rise and fall, inventories will contract and expand, and demand must be there to absorb the shadow inventory as it hits the market.