Banks and individuals are holding on or attempting to sell at an unrealistic price. The loss is only taken if either a foreclosure takes place or a sale at the loss level.
Many Brits for example who have lost carry the debt on their property in the UK through second mortgages taken out to buy in Spain. So essentially that loss is hidden.
Some are also renting successfully long term to other people, mainly Spanish made homeless by foreclosure.
Shakeel is right the reason why you hear so little right now about the problems in Spain is attention is focused elsewhere. Also Spain has not come clean yet with the true extent of their losses, especially the banks.
If Greece does go down and I believe it eventually will then contagion will spread to Spain, pushing up bond yields and forcing the government to reveal the amount of financial help it actually will require to stay afloat.