While June inventories continue to be down on year-over-year basis, they rose for the sixth consecutive month and are steadily returning to more normal levels. The number of homes listed for sale increased by 4.3 percent in June to 1.9 million homes, the highest level in the last year, according to monthly data released Monday by realtor.com.

Inventories on realtor.com reached their highest level in more than a year, suggesting that market fundamentals continue to be strong and that housing supply in many markets is gradually catching up with housing demand. At same time, the median age of the inventory increased by just one day in June, suggesting that housing sales are generally keeping pace with new property listings.

Both year-over-year list prices and inventories rose simultaneously. While the median list price has stabilized somewhat, it remains 5.27 percent higher than it was one year ago. Rising inventories appear to be having a moderating effect on median list prices, although on a year-over-year basis, median list prices were up by 1 percent or more in 98 of the 146 MSAs covered by realtor.com, compared to 103 markets in June, while the number of markets with a list price decline of at least 1 percent rose from 23 to 25.

Key Market Indicators for June 2013

Despite six consecutive months of steady growth, inventories continue to be down by 7.29 percent on a year-over-year basis, although they are now approaching more normal levels. The median age of the inventory rose to 80 days in June, up by one day (1.27 percent) over the month but down by 15.79 percent on a year-over-year basis.

The geography of low inventories changed during June. The top ten markets reporting year-over-year inventory declines are no longer dominated by California markets but now include Boston, Lansing, Grand Rapids and Monmouth NJ. Their potential shortfalls in supply are likely to support robust house price appreciation going forward. Inventories remain depressed in markets where prices have not improved significantly or where negative equity is greater than elsewhere, making it difficult or owners to sell.

10 MSAs with Greatest Year-over-year Inventory Increases

The for-sale inventories were up by one or more percent on a year-over-year basis in 20 markets in June, compared to 15 markets in May and just 7 markets in April. Markets with the largest increases are shown below. In some of these markets-especially those in California-rising inventories may simply serve to prevent a potential housing bubble by creating a greater balance between supply and demand. However, in other markets-for example, Dayton, Springfield, Shreveport, and El Paso-rising inventories may be a signs of continued and growing market weakness. In either case, the increase in the number of markets with significant YOY increases in their for-sale inventories category suggests that house price appreciation may begin to moderate as the 2013 home buying season draws to an end.

Largely as the result of local economic conditions rather than national patterns, many smaller markets continue to struggle and their numbers appear to be modestly down compared to one year ago. Given the problems that continue to plague these markets, it is unlikely they will experience the run-up in housing values that was seen in other areas.