DENVER - Homes for sale are becoming scarce in neighborhoods throughout the Denver area and it is creating a seller's market. Real estate for sale signs, once common during the recession are now few and far between. The inventory of single family homes on the market in the Denver area has reached a five year low.

"There's demand out there to buy houses. The inventory simply isn't there," Ron Thorne, a real estate broker with Keller Williams Realty, said.

According to data from Metrolist, the number of single family homes on the market at the end of February 2008 was 19,067. By the end of February 2012 that number had fallen to 8,082 and at the end of this February the number was down to 5,541.

The reasons for the decline in housing inventory include the slowdown in housing starts during the recession and the increase of first time home buyers entering the market.

"First time home buyers are suddenly waking up to the reality that interest rates are at an all time low and prices have not shot up dramatically yet," Thorne said.

Median home prices in the Denver area have gone up. In February of 2008 the median home sale price was $221,000. In February 2012 that price had fallen to $220,000. But this February the median home sale price in the Denver area had risen to $255,000.

"They're going fast and they're going for a lot more than the listed price," Thorne said.

As a result some home sellers are seeing bidding wars among buyers.

"For example, I have a client and we've put in probably a dozen offers over the past few months. We've lost out on every single one of them," Thorne said.

While the shortage of homes on the Denver market is creating a very competitive climate for buyers, Thorne cautions home buyers not to overpay for properties. Doing so can create problems if the home does not appraise at the sale price because lenders won't fund loans in excess of the appraised value of the property.

His advice is to buyers is to find a real estate agent who can give guidance and help with a home purchase.

(KUSA-TV © 2013 Multimedia Holdings Corporation)