“Price increases will spur more new construction, which will add to inventory,” Kolko said in an e-mail. “And price increases will lift some underwater borrowers back above water, encouraging some of them to sell,” he said, referring to homeowners who owe more than their property is worth.

Updating Houses

More homeowners who awaited higher prices are preparing to list their houses this year by painting, laying carpets and sprucing up kitchens and bathrooms, said Alan Smith, a broker with Re/Max Professionals in Littleton, Colorado.

“There’s a lot of updating going on so they’re ready to go to market,” Smith said in a telephone interview from his office in the Denver area, where prices climbed 6.9 percent in the 12 months through October. “A lot of folks’ homes are tired and they haven’t had the money or the time to update them.”

The estimated 11 million underwater homeowners have created a “paradox of negative equity,” according to Sam Khater, senior economist for CoreLogic Inc., an Irvine, California-based real estate data service. Because they can’t sell without taking a loss, these homeowners have helped drive up prices by limiting inventory listed for sale, he said.

Distressed Sales

Distressed home deals already account for a smaller share of transactions. In November, 22 percent of resales were foreclosures or short sales, when the lender agrees to sell for a loss. That was down from 29 percent a year earlier, according to the Realtors group.

The decrease is helping to boost home-price indexes and creating a false sense of a healthier market, said Michael Feder, CEO of Radar Logic Inc., a New York-based property price research company.

“We are not in a real housing recovery yet,” he said in an e-mail. “Current signs of improvement could evaporate quickly.”

Distressed-home inventory has been drying up as investors purchase foreclosed properties and other low-cost homes. Blackstone Group LP, the world’s largest private-equity firm, has been buying as much as $100 million of homes a week to manage as rentals or sell when prices rise.