It’s no secret that chronicle inventory shortages are curtailing home sales.  Now Redfin reports evidence that buyers are getting the message and buyers are staying away.

The Redfin Housing Demand Index fell 5.5 percent to 97 in February from a year earlier, marking the third consecutive month of year-over-year declines in demand. The drop in demand was a result of nine consecutive months of year-over-year declines in inventory, which fell 3 percent across 15 major markets in February. Fewer homes for sale translated into fewer people viewing listings online, a key component of the Demand Index.

Despite limited selection, we see strength in the numbers of buyers actively touring homes and making offers. The number of Redfin customers requesting tours rose 19.2 percent year over year, while the number writing offers increased 4.1 percent, rebounding from a 6.4 percent decline in January. And while a near-record high number of customers were touring homes last month, a smaller portion was writing offers due to the constraints of low inventory and competition from other buyers.

In February, 61 percent of offers written by Redfin agents faced bidding wars, about the same level as last year, and the typical home spent 34 days on the market, five days fewer than a year earlier.

“I can’t think of too many recent instances where I made an offer that didn’t face a bidding war, with anywhere from a handful to 25 buyers competing for a single home,” said James Gulden, a Redfin agent in Boston. “Finding out you’re up against so much competition can be intimidating, and a lot of buyers who are new to the market choose not to proceed with an offer in a situation like that. Buyers feel a lot more confident when they are well educated about the current market conditions, know what to expect along each step and are financially well prepared with a lender who’s able to approve a loan quickly.”

Still, there’s good news for buyers. First, price growth is slowing. The median sale price was up 4.1 percent in February, the lowest level of growth recorded across the 15 markets in at least two years. Second, new listings were up 10.9 percent year over year in February which, if it becomes a trend this spring, will eventually lead to a healthier level of inventory for buyers.

“Many buyers aren’t able to take advantage of rock-bottom mortgage rates because of the dearth of homes in their price range,” said Redfin chief economist Nela Richardson.  “Since February, we’ve seen the supply shortage start to improve with a surge in new listings. If this trend continues, with homes added in affordable price ranges where they are needed most, we expect homebuyer demand growth to come roaring back.”

The Demand Index tracks millions of visits to Redfin.com and the touring and purchase offers of thousands of Redfin customers in 15 major metro areas. The index equaled 100 on January 2013, the first month of the estimation period, and is adjusted for changes in Redfin market share.