Editor’s Note: This item is republished with permission from Inman News. View the original article, "Shrinking inventory bolstering many housing markets."

Note: This report is based on Realtor.com’s August 2012 Real Estate Trend Data Report. The report covers 146 U.S. metros and includes single-family homes, condos, townhomes, and co-ops.

The number of homes for sale nationwide fell 18.68 percent from a year ago in August, to 1.84 million, Realtor.com reported today, continuing a trend that's manifested itself every month so far this year.

Year-over-year trends in median list price and median age of inventory, particularly in California, also indicated many housing markets are beginning to stabilize.

The median age of inventory was down in August (11.65 percent) from a year ago to 91 days while the national median list price was up a slight 0.5 percent from last August to $190,000. For-sale inventories declined on a year-over-year basis in August in all but two of the 146 metros Realtor.com tracks.

"We're beginning to see the earliest signs of recovery," said James Gaines, a research economist with the Real Estate Center at Texas A&M University, pointing to an increasing number of sales. "The market's beginning to overcome the psychological malaise that infected it, particularly in California."

While shrinking inventory is a sign of a stronger housing market, the lack of supply doesn't necessarily correlate with strong demand, Gaines said.

Gaines said important factors keeping supply low include:

  • A low (but rising) number of housing starts.

  • A continued backlog of homes in foreclosure.

  • A reluctance or inability of would-be sellers—some of whom may be underwater on their mortgage—to list their homes because they're anticipating home prices will rise.

  • Sales of higher-priced homes that aren't listed for sale.

California was home to eight of the top 10 metros for year-over-year inventory reductions and five of the top 10 metros for year-over-year list price increases in August were. But Gaines said large drops in inventory and increases in list prices, while indicating much healthier markets than a couple of years ago, can give a deceiving picture of the strength of the recovery in California, Gaines said. The market was so down, he said, that there was no place to go but up.

Oakland, Calif., for the sixth month in a row, has the lowest for-sale inventory of any of the 146 metros Realtor.com tracks with 3,205 listings and a minuscule median age of inventory of 20.

Leah Tounger, a Coldwell Banker Real Estate based in Oakland, says she noticed the Oakland market switched from a buyer's one to a seller's one sometime in March or April this year. She no longer holds two open houses for her listings, she said. One is enough. Often, buyers try to pre-empt the sale by making offers before they're officially accepted, she said.

Tounger has sold six homes so far this year, and the last few were scooped up within 10 days and went for from five to 15 percent over list price.

On the flip side, representing buyers has been a challenge, Tounger said. One home in the nearby Berkeley, Calif., hills that she put an offer on for a client had 17 offers and eventually sold for over $300,000 above list price.

The demand for "good" inventory is high in these nation-leading turnaround markets in California. Oakland ranks No. 6 for year-over-year median list price increase (13.56 percent to $385,000) in August. San Francisco Bay Area neighbors, San Francisco and San Jose rank No. 3 and No. 4, respectively. Santa Barbara-Santa Maria-Lompoc, Calif. tops the list with a 38.96 percent increase in year-over-year median list prices to $749,000.

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Learn more about markets featured in this article: San Francisco, CA, Stockton, CA, Fresno, CA, Riverside, CA, Bakersfield, CA, San Jose, CA, Seattle, WA, San Francisco, CA, Atlanta, GA.