NEW YORK (
) -- The housing market is currently trapped in an "inventory spiral" that is unlikely to snap for at least another year, according to Jed Kolko, chief economist of online real estate company
"Housing inventory is scarce across the country and will probably be even tighter this time next year," said Kolko, in a
Tuesday. "However, inventory is declining more slowly now than it did a year ago, when prices bottomed."
Housing prices found a floor in February 2012 and have been on the rise as strong investor demand and a decline in foreclosure sales has helped shrink years of excess supply.
Housing inventory nationwide declined 23% year-on-year in February, according to the
Department of Numbers' Housing Tracker
. Inventory fell year-on-year in all 50 of the largest metros and was down more than 50% in several California metros.
The steep decline in supply has resulted in price increases of 10% or more in metros such as Sacramento, San Jose and Seattle.
More recently, the pace of inventory decline has shown signs of slowing down. The quarter-over-quarter decline in inventory has been at a 14-21% annualized rate since October 2012, compared with a 23-29% annualized rate from March 2012 to September 2012.
Still, there is a shortage of inventory in the housing market. At the current sales pace, it would take only a little more than 4 months to clear all the inventory in the housing market.
This shortage bodes well for home prices, but it is not good news for buyers who are slowly returning to the housing market only to discover they have few good choices.
It appears this shortage might persist for a while, according to Kolko.
"Everyone wants to buy at the bottom; no one wants to sell at the bottom," the economist notes in his report. "When prices start to rise, buyers get impatient, while many would-be sellers want to hold out in the hopes of selling later at a higher price."
So while less inventory led to higher prices in the early part of the recovery, higher prices are now causing a shortage of inventory. This is the "inventory spiral" Kolko is talking about.