Inventories overall have fallen 20 percent but the supply of lower tier, entry level properties is tighter than that as bidding wars erupt in markets across the country that until very recently were choked with foreclosures and short sales.

In June, the distressed share of sales fell to 21 percent of all sales, the lowest level in almost four years, and market share of bargain-priced foreclosures has continued to decline. The months’ supply of distressed properties has been steadily decreasing over the first half of the year and now stands below seven months, equaling the same level of the supply of active listings. CoreLogic’s Home Price Index, including distressed sales, posted the largest year-over-year spring gain in the last 25 years.

Increased competition for the limited inventory of non-distressed property listings helped push the average home sales-to-listing price ratio to 95.6 percent in June, the highest in three years, according to the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey.

An analysis by economist Sam Lawlor published in the Calculated Risk site last week shows that distress sale market share is continuing to fall. In a number of key markets the distressed home sales share in July was down about ten percentage points from a year ago and “non-distressed” sales have actually been running very strong relative to a year ago (see Normal Sales Soar Despite Obstacles).

Competition for lower priced, entry level homes is breaking out in the form of bidding wars and soaring prices across the nation.

In May, Zillow reported that the lower tier nationwide experienced an average 12 percent decline overall, Las Vegas, Colorado Springs and San Francisco saw more than a 50 percent drop, Zillow’s data show In May, Phoenix had 66% fewer lower-price homes listed for sale than it did a year ago.

In North Portland, OR, as a result of the large stock of homes priced below the average, many of which are distressed properties, North Portland prices are rising faster than anywhere in the metro area. The last 12 months have seen a 4.4 percent increase compared with the 12 months prior (RMLS’s preferred method for area reporting to control for volatility), reports the Portland Oregonian.

Real estate agent Kimberley Kelly reports that the LaQuinta CA market is seeing “Multiples on everything. Investors fighting to get in at the price/sf that allows them to make money and first time homebuyers trying to secure homes that they can afford. FHA loans are shoved behind Conventional offers which are usually tromped on by the Cash offers. It’s a battleground.”

“We just finished the strongest first quarter for closed home sales in five years and the second quarter is delivering even greater results,” said Prudential Network Realty Founder, President and CEO Linda H. Sherrer in June.. “I believe we have entered a period of equilibrium; some sellers are finding that they are in the driver’s seat when it comes to negotiating price and terms.”

Why are these multiple offer situations happening? With fewer homes to choose from, multiple offers on homes for sale are becoming more common, particularly with homes priced at market value, in a good location and condition, reported Prudential Network Realty