It could be a good thing or a very bad thing, depending on how you look at it.

AP

Existing home inventories jumped, on an absolute basis, 9.5 percent from January to February.

That translates into 312,000 new properties added to an existing market, to total 3.59 million homes for sale.

Given the slow sales pace, that translates into an 8.6-month supply (in Realtor-speak that means it would take roughly that long to sell those houses at the current pace).

I saw some analysts claim this is a seasonal effect, as sellers get ready for the Spring market, but the Realtors said it is a much bigger jump than usual, in fact the biggest they've seen in a few decades.

"The inventory increase, one of the strongest from January to February, is discomforting, and it could pressure prices to decline later on," admits Lawrence Yun, chief economist for the National Association of Realtors.

Yun claims some of the run-up in For Sale signs is due to step-up buyers who want to list their homes now in order to buy something before the end of the expanded home buyer tax credit April 30th. I don't really buy that. The time frame is too short, given that these days it can take many months to sell a home. Perhaps some sellers want to take advantage of what they think will be a surge of first-time home buyers, but, again, we've yet to see any sales surge, and the credit expires five weeks from Friday.

The run-up in inventory may more likely be due to increased numbers of distressed properties on the market. The banks are working through the modification process more quickly now, and many many borrowers are not qualifying and therefore being moved to foreclosure.

Next month the government's Home Affordable Foreclosure Alternative Program kicks into gear, but even Yun was very hesitant about saying whether or not that would get these distressed properties sold quickly.

"$1500, it is unclear how much incentive that is, but some. I hope that it works because we really need to clear off some of the inventory that is clogging up the system," says Yun.

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