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Trulia: Asking Prices Up 7.0% in February as Inventory Spiral Slows

National asking home prices have risen 7.0 percent year-over-year since bottoming out last February, ""Trulia"":http://www.trulia.com/ revealed in its February Price Monitor Report.

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Seasonally adjusted, asking prices increased about 1.4 percent from January and 3.0 percent quarter-over-quarter, marking two post-recession highs.

Nationally, inventory fell 23 percent year-over-year in February, according to data provided from ""Department of Numbers"":http://www.deptofnumbers.com/. Inventory fell year-over-year in all of the 50-plus markets tracked, dropping more than 50 percent in several California metros. Trulia noted that nearly all of the metros with the biggest inventory declines also had year-over-year price increases in the double-digits, such as [COLUMN_BREAK]

Sacramento (18.1 percent), San Jose (18.5 percent), and Seattle (13.1 percent).

Jed Kolko, Trulia's chief economist, explained that while falling inventory boosts prices, the relationship works both ways as sellers start holding out in the hopes prices will continue to increase. However, that cycle only works short-term.

""[L]ess inventory leads to higher prices, which leads to less inventory, and so on. But the inventory spiral can't go on forever because eventually rising prices will encourage homeowners to sell and builders to build, which add to inventory and breaks the spiral,"" Kolko wrote in a ""blog"":http://trends.truliablog.com/2013/03/trulia-price-rent-monitors-feb-2013/ for the company. ""The critical question for the housing market--especially for buyers fighting over tight inventories--is how long until that kicks in?""

While inventory decline has slowed from its pace in mid- to late-2012, Kolko posits that it could be at least another year before inventory starts expanding at the national level.

""The experience of metros where prices bottomed earliest suggests that inventory continues to decline even after 2 years of price increases. It also means that inventory should turn around first in metros where prices bottomed first, such as Phoenix, Miami, Detroit, Houston, and Oklahoma City, and later in metros where prices bottomed more recently, such as Sacramento and California's Inland Empire,"" he wrote.

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