The outlook for a more abundant, more affordable selection of homes for sale this spring improved considerably in February.  Sellers in most markets are responding to the price increases of the past year, suggesting they are increasingly optimistic about the housing recovery and the underlying strength of market demand through 2014, according to the latest February data from realor.com.

While February inventories remain are still low by historic standards, they increased 4.26 percent over January and more than 10 percent over last year.  Following seasonal patterns, they will probably continue grow over the next two months with the coming of spring.

With the spring buying season around the corner, inventories of new listings are growing in every region and in markets of all sizes.  The number of markets with inventories that are up by at least 1 percent greater than last year rose from 20 markets in June 2013 to 97 markets in February 2014.  These trends suggest a more balanced housing market going into the 2014 home buying season.

In the California markets that became overheated last spring, inventories have bounced back.  Sacramento and Stockton have twice as many homes listed on realtor.com than they had a year ago.  Fresno, Bakersfield, Riverside and Oakland all report year over year increases of 40 percent or more on the numbers of homes for sale.

Among the ten largest markets still registering inventory declines from a year ago, Denver and Chicago are relatively strong markets whose median list prices are up on a year-over-year basis by 20 and 14 percent, respectively.  The inventory deficits in these two markets will likely continue to put significant upward pressure on housing prices going into the 2014 home buying season.

The remaining eight large markets with inventory deficits probably will see little if any effect on prices unless inventories continue to fall.  They have experienced below-average year over year list price increases and one of these markets (South Bend) has actually experienced a 2 percent list price decline.

List Prices are Rising in Advance of the Buying Season

Despite the increase in inventory, the median list price jumped by more than 2 percent in February to $199,000, 7.57 percent higher than it was one year ago.  These list price increases are another sign of seller confidence going into the selling season as sellers price their homes in anticipation of market conditions in the coming months.

The majority of housing markets are entering the 2014 home buying season in significantly better shape than they were one year ago.  California, Detroit, Nevada markets continue to dominate the list of areas experiencing the largest year-over-year increases in their median list prices, although the average size of their list price increases dropped slightly, from about 27 to 25 percent.

 Market is More Balanced

On a year-over-year basis, the median list price and the size of the for-sale inventory were up by 7.57% and 10.14 percent, respectively.  These are positive signs that the market is more balanced and that we will not see a repeat of last year’s overheated markets, soaring prices and multiple bid situations.

The median age of realtor.com’s inventory barely changed during the month, but those California market undergoing a huge inventory build-up also are reporting the newest average inventories.

By contrast, a handful of resort and industrialized markets located in the East and Midwest trail the nation in terms price decreases and aging inventories where listings are selling very slowly.  These include Shreveport-Bossier City, LA; Rochester, NY; Omaha, NE; Newark, NJ; Little Rock-North Little Rock, AR; Portland, ME; Toledo, OH; Albany-Schenectady-Troy, NY; Trenton, NJ; and South Bend, IN