The recent reports that came out from both the Commerce Department and the National Association of REALTORs paint a dark picture for prospective homebuyers who have either waited to buy a home until they had the money to do so or waited too long because they believed that home prices would drop even further.

Commerce reported today that housing starts fell 8.5% in January to a seasonally adjusted annual rate of 890,000, compared to 973,000 in December 2012, which was the best month for new-home starts since June 2008. While the number of new building permits increased 1.8% last month from 909,000 in December 2012 to 925,000 in January and the pace of construction of single-family homes in January rose slightly to 0.8%, builder confidence on the National Association of Home Builders/Wells Fargo Housing Market Index dropped one point this month to 46, which is considered a poor outlook. An index where the number is over 50 indicates home builders’ positive outlook on single-family home sales.

Home building firms are scaling back on construction due to the rising costs of building materials and a growing financial burden shifted onto businesses. This also impacts job growth as these firms cannot take on any more employees on their payroll.

The National Association of REALTORS reported today that existing home sales rose slightly by 0.4% to a seasonally adjusted rate of 4.92 million last month, up from a downwardly revised figure of 4.90 million in December 2012 and up 9.1% above the pace of 4.51 million in January 2012.

As more homes are being bought, there are fewer available on the market. NAR stated that total housing inventory at the end of January fell 4.9% to 1.74 million homes for sale. This represents a 4.2-month supply, down from December 2012 — when it was a 4.5-month supply — and matching a low set in April 2005.

The shrinking inventory has also caused home prices to increase due to high consumer demand. In addition, those who currently own a home are looking to sell their homes but are unable to do so because either their house is worth less than what they owe or they lack the equity needed to buy a new home.