The housing recovery has barely begun, yet some experts say home prices are at risk of overheating because the inventory of existing homes is shrinking.
This year's house-hunting season may reveal if steady price increases last year can induce enough people to sell their homes to meet rising demand.
"We're not sure what's going to happen this spring," said Walter Molony, a spokesman for the National Association of Realtors.
The number of existing homes on the market fell 8.5% in December from November to 1.82 million, the lowest in nearly 12 years.
Inventory is 22% below a year year ago and considered even tighter for low-priced homes. Meantime, sales are up 13%.
The stock of new single-family homes has just begun to inch up.
Unless inventories get back to normal, prices will come under excessive pressure with more homes seeing multiple bidders competing, Molony warns.
Prices for existing homes advanced 6.3% last year and could appreciate another 5% to 6% this year. But if inventories stay constrained, prices could rise 10%, Molony estimates.
Sustained double-digit growth would hurt affordability, reversing the effects of ultralow mortgage rates.
"It's going to be very interesting to see what happens in the next couple of months," he said.
Rising prices are encouraging some homeowners to put properties on sale again. But other factors are preventing more supply from coming on the market.
Molony says a major reason is banks' restrictive lending standards, which limit buying as well as new-home construction.
Bankers, though, say lowering mortgage standards is a bad idea.
"Credit was restricted for a while, but ... it had to be restricted because this is what helped open the problem up," Bank of America (BAC) CEO Brian Moynihan said at the recent World Economic Forum in Davos, Switzerland.
Also keeping homes off the market is the fact that many owners still owe more money than their homes are worth. Some who aren't underwater are holding out for further price gains.
And some homebuilders like Lennar (LEN) and Toll Bros. (TOL) are building more apartments.
Relief will come eventually. By late 2014, people who bought homes at the top of the last cycle should be able to sell without losing too much money, predicts Celia Chen, a senior director at Moody's Analytics.
Demand doesn't look like it will skyrocket either, given weak incomes and slow credit growth, she adds.
The pipeline of distressed homes that could end up on the market is still high and should dampen the pace of price gains, though states that require judicial proceedings to foreclose will add to supply slowly, Chen says.
But prospective homebuyers will continue to compete with investors who buy up properties to collect rental income. Median rent hit a new high in Q4.
Investors remain active in the market. They accounted for 21% of purchases in December, unchanged from a year ago. First-time buyers made up 30%.
In Riverside County, Calif., which saw one of the nation's worst housing busts, higher prices are getting more homeowners to sell again, says Sherri Cort, the broker-owner of Westar Realty.
The main inventory bottleneck she sees is investors snapping up bulk supplies of distressed properties from banks before they go on the market.
For the homes that do get listed, Cort has seen investors engage in bidding wars. The wave of investors, who include many from overseas, is putting homes out of reach for other buyers.
"A regular family can't compete," Cort said.