If homeownership is decreasing, how is it that the U.S. housing inventory is shrinking?

Investor owned properties who are renting out their single family homes account for 27% of single family homes nationwide, and bank owned foreclosed home that are sitting vacant and not yet on the market (shadow inventory). Here's a great article that might help explain it for you... http://azstarnet.com/business/local/housing-investor-owned-homes-opportunity-for-new-owners/article_02929082-9965-5ee2-9a5a-a17e81e9ee7e.html. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

People can't sell there house because they don't have the equity and then people can buy because the lending guidelines keep getting more strict. Inventory is houses on the market and if they can't be sold then they get pulled off the market.

The enormous inventory of distressed sales (short sales & foreclosures) is finally being depleted through sales (mostly first time buyers). But, those that have a home to sell in order to buy the next one (move up buyers), are still tied up in negative equity or refuse to take a big hit on the sales price. So they are staying put for now, waiting for a market increase.

I agree with bits and pieces of the other responses. One of the main reasons is more people are renting homes.

More renters, and banks are holding "shadow inventory" off of the market, in an attempt to stabilize the market.

Homeownership levels are decreasing after the housing disaster because some many of those people can no longer get a loan. Investors are snapping up these properties and turning them into rentals. Inventory is shrinking as the number of foreclosures fall from the available inventory, and many of those wanting to sell are too upside down to make it happen. www.JoeMetzler.com

Investors with Cash are buying up the excess inventory

A combination of investors buying single family homes as rentals and banks are holding back their inventory of foreclosed properties as to not flood the market and drive prices down.

In Michigan the problem is that there are fewer foreclosures hitting the market and homeowners are still hesitiant to list there homes for sale. this ombined with the lack of new homes being built has created a low inventory. While these factors are what's happening in Michigan, I believe they are the root of the problem nationwide.

There aren't as many foreclosures on the market anymore.