Prompted by two years of steadily rising prices, inventories are reaching levels higher than they have been in two and a half years according Zillow.

Inventory shortages have plagued real estate markets for much of that time, but the latest data suggests that the pendulum may have swung too far in the other direction.  Zillow reported that national for-sale inventory levels remained below peak levels, but have been steadily rising since February. In August, U.S. inventory of for-sale homes grew year-over-year by 20.6 percent, higher than they have been since the first half of 2012.

HousingTracker, which tracks MLS prices and inventories in 55 markets on a weekly basis, also reports that inventories have rising and now are 13.3 percent higher than they were a year ago.

Sellers have been listing their homes right up to the end of a home buying season that saw sales so sluggish that the national Association of Realtors now forecasts a 2.1 percent decline from last year while Fannie Mae predicts sales will be down by 3.5 percent.  NAR reported today that total existing-home sales decreased 1.8 percent to a seasonally adjusted annual rate of 5.05 million in August from 5.14 million in July. Sales are at the second-highest pace of 2014, but they remain 5.3 percent below the 5.33 million-unit level from last August.

High inventory overhangs at the end of the home buying season can depress prices for the balance of the calendar year.  Prices have remained strong through the first half for the second year in a row and most forecasters expect the median price for single family homes to rise about 5 percent over 2013 by the end of the year.

NAR said today unsold inventory is 4.5 percent higher than a year ago, when there were 2.21 million existing homes available for sale.  Total housing inventory at the end of August declined 1.7 percent to 2.31 million existing homes available for sale, which represents a 5.5-month supply at the current sales pace.

Realtor.com, an excellent source of current listing investor data, reported year-over-year inventory was up only 2.3 percent in July.  August data has not yet been released.

Source: Realtor.com

Zillow reports that Inventories rose in 549 of 644 metro areas (85 percent). In many areas, including Dallas-Fort Worth and Denver, inventory shortages are driven by fewer homes for sale in the bottom third of the market by value (Figure 5). Only 15 percent of homes for sale in Dallas-Fort Worth and Denver are in the bottom tier of homes by home values. But, in areas like San Jose and San Francisco, bottom tier homes are the largest tier of for-sale inventory.