The spring is nearing and while many buyers will be out looking for a new home, they may not have many to look at. Impending home sales are up four and a half percent, nearly 10 percent above a year ago, but the supply of existing homes for sale has fallen for seven straight months.

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"Inventory is the key to this year's housing market," said Walter Maloney, spokesman with the National Association of Realtors. "Favorable affordability conditions and job growth have really unleashed the pent up demand with most areas drawing down the housing inventory. This has shifted the supply/demand balance to sellers in most of the country. But, it's also why we're experiencing the strongest price growth in more than seven years."

The shortage of sellers is expected to ease as the prices continue to rise, but total sales this year are still expected to rise less than they did last year. "Home prices are expected to rise more than in 2012 because of these inventory shortages," said Maloney. "Job creation and pent up demand has led to this sustained gain in sales activity. At the same time, inventory is moving steadily down."

In July 2007, more than four million homes were on the market. Currently, there are 1.7 million for sale. As fewer foreclosures work their way through the market, there is less low-end inventory. New home construction is picking up, though it's not where it needs to be which is creating a supply/demand imbalance.

A return to healthy inventory levels could take years. Many homeowners can't afford to sell because they don't have enough equity to buy another house.

"The good news is that more and more people who bought at the peak of the boom and saw their values drop are now becoming whole. It's going to take a while for everyone to become whole. In fact, some may never. But, the bottom line is, we've seen about two million households in the past year benefit from rising prices and have gone from negative equity to positive equity. Those with comfortable amounts of equity in their home are now in a good position to sell," said Maloney.