New data from Altos Research shows that housing supplies have been steadily declining for the last 16 months. The company says there are 20 percent fewer homes for sale now than there were in 2008.

Some fear this decline is because banks have been holding back their repossessed properties, but Altos doesn’t expect this so-called shadow inventory to result in a real estate day of reckoning in 2010 as some market observers have warned.

Scott Sambucci, VP of data analytics at Altos Research, says the industry won’t see any effects from the supply of homes lurking in the darkness until inventory levels pick up. And he doesn’t foresee that happening anytime soon, primarily because banks have no immediate motivation to offload these assets from their balance sheets, and are keenly aware that a sudden jump in the number of homes on the market could be detrimental to already-fragile property values.

With a smaller selection of inventory, buyers will pay a higher price – the rudimentary concept of supply and demand. Sambucci says he’s already seen definite evidence of a price floor in 2009. Home price statistics started out 2010 on a good foot, according to Altos’ data, with seven-day moving averages within the company’s index bouncing off their lows and starting to tick up.

In addition, the number of homes with price reductions and the magnitude of these discounts are diminishing, although Sambucci says that could indicate buyers’ willingness to pay more or it could just mean sellers are becoming more realistic about what they can get. Either way, price reduction stats, while still elevated, are moving in the right direction, he says.

Altos’ researchers expect to see some seasonal bounceback in prices and short-term strength in the coming months as a result of government stimulus, such as the homebuyer tax credit and the last of the Federal Reserve’s purchases of mortgage securities.

But Sambucci says that momentum will likely fall off toward the latter half of 2010, and any price gains seen this year will be lost as the government programs wind down. Altos expects home prices to start 2011 at the same level they are now in early 2010, but Sambucci says that’s not necessarily a setback. He explained that if inventory continues to decline, by next year price points should become more attractive and activity can still be sustained.