The supply of homes for sale is still unusually tight as the spring buying season opens, turning up the heat on already-rising prices.
The number of homes listed for sale on real estate website Zillow was down almost 17% in late February vs. a year earlier. In some California markets, it was down more than 40%.
The supply crunch is likely to last all year, says IHS Global Insight economist Patrick Newport. "We're still not building enough homes."
The U.S. is creating about 1.1 million new households a year, but housing starts in January came in at an 890,000 annual rate, the government says.
As prices rise, though, more owners will be motivated to sell, easing supply shortages, economists say. The tight inventory is a big driver of rising prices.
Home prices were up 7.3% in the fourth quarter from a year before, Standard & Poor's Case-Shiller data show. That was much faster than most economists expected for 2012.
Nationwide, the supply of homes for sale -- based on the pace of sales -- fell in January to 4.2 months, the National Association of Realtors says. That's an almost eight-year low. A six-month to seven-month supply is considered balanced between buyers and sellers.
The availability of the most expensive homes in the markets Zillow tracks has tightened more than those at lower price levels.
Homes for sale in what Zillow defines as the top price tier in each market fell by almost 21% in February vs. a year earlier. The inventory of homes in the middle tier dropped 17%; those in the bottom tier fell 9%.
Five California cities in Zillow's survey are among those seeing the biggest inventory drops, from a 48% decline in Sacramento to a 36% falloff in Riverside. Other cities are also seeing significantly fewer listings. New York is down almost 19%; Dallas/Fort Worth, nearly 21%; and Orlando is off 27%.
Only five of 99 metros showed an increase in listings, led by El Paso, up 19%, and Albuquerque, up 8%. Little Rock, Fort Myers, Fla., and Youngstown, Ohio, also saw increases.