Inventories of homes for sale have been slow to bounce back since the 2007–09 recession, despite steady price appreciation since January 2012.

Normally, higher prices reflect robust sales. But lately, prices have been rising even though sales remain stuck at relatively low levels. The National Association of Realtors reports that an annualized 4.5 million homes were sold in June 2013, roughly the same as at the end of the 1990s.

Many prospective buyers attribute the low sales volume to a lack of inventory on the market. So why are there so few homes for sale? There are lots of reasons why.

William Hedberg, a research associate, and John Krainer, a senior economist, both with the Federal Reserve Bank of San Francisco, examine some of the factors affecting this “more complicated than normal” situation in a recent paper. Here are their key findings:

Many homeowners are still underwater. Many properties are still worth less than the value of their mortgages, which would leave sellers owing additional money at closing.

As a result, a large number of homeowners are waiting for house prices to rise, allowing them to recover lost equity. They delay putting their homes up for sale until the situation improves and they can make back enough to cover the down payment on their next purchase.

Putting a home up for sale can be costly. Sellers routinely make home repairs and renovations, add landscaping, and even rent new home furnishings to make the home more appealing to potential buyers. Even though the general economy has improved, not all sellers can afford to spruce up their homes to get top dollar. So they wait.

Lenders’ worries ease during good economies. We’re not there yet. Tight credit conditions affect homeownership decisions of young buyers. Easier loan approvals allow more people into the housing market. Lots

of people (such as first-time homebuyers) have less-than-perfect credit scores, so they still can’t qualify for mortgages.

Fallout from the housing boom and bust has played a role. A remarkable feature of the boom was the unprecedented rise in homeownership rates. Younger households became more willing and able to buy homes. Lending terms and conditions eased substantially, allowing less creditworthy borrowers into the market.

These trends went into reverse during the housing crisis and the homeownership rate has fallen. With fewer households purchasing houses, inventory has shifted from the for-sale to the for-rent category.

When people are nervous about the economy, they rent. The for-rent inventory of homes as a share of total housing units has risen steadily during the recession and the recovery, while the for-sale inventory has steadily dropped but is now stabilizing. Census Bureau data suggest that the drop in owner-occupied units relative to renter-occupied units is unprecedented since the 1960s.

The changes in for-sale and for-rent inventories are seen most dramatically in markets where foreclosure rates were high and where investors are now reportedly playing an important role in home sales. In markets such as Las Vegas, Miami, and Phoenix, the total inventory of homes for rent is approaching that of homes for sale. This shift has continued throughout the recovery, not just most recently when prices have been rising and inventories have failed to respond.

The decline in homes for sale is very closely linked with the large downward shift in the homeownership rate in these markets. It is impossible to say, though, whether declining sales are pushing down homeownership rates or vice versa. But both factors are clearly interacting with each other.

Tight credit means fewer new houses can be built.Builders have to qualify for loans to build spec homes. Fewer new homes means less inventory.

Homeowners are taking a longer-term view of the housing market. Homeowners who aren’t highly motivated to sell can wait for the pricing momentum to shift. If they observe prices going up, they may want to wait and gamble that the increases will continue, allowing them to sell later at a higher price.

To learn more and dig deeper into the data, you can find Hedberg and Krainer’s full explanation along with accompanying graphs on the San Francisco Federal Reserve Bank’s website.