This is a pretty academic paper, and it’s not clear to me the researcher has his/her feet on terra firma. Take this statement:

At the same time though, the level of house prices is by far the most important cyclical variable that influences the inventory of homes for sale.

What about builders and new homes?

And this statement:

…Las Vegas, Miami, and Phoenix, the total inventory of homes for rent is approaching that of homes for sale. …the impact of investors in these markets should not be overstated.

The impact of investors cannot be overstated, or should not understated? These are the only three places that corrected and investors flocked to them. Las Vegas saw a 29% increase in one year to July 2013. That party is, I believe, now over. I have seen up to 50% percent of inventory with multiple price reductions. There is a distinct pattern emerging in many of the listings that looks like investor activity. Supply is rebounding, which is what you’d expect, as hedge funds offload in what now seems like a declining market. They sucked up the supply creating the vacuum, pushing up prices and now want to cash in their chips. I’d say investors have had a big influence on this market.

I just couldn’t make sense of this statement:

The decline in homes for sale is very closely linked with the large downward shift in the homeownership rate in these markets. It is impossible to say though whether declining sales are pushing down homeownership rates or falling homeownership is pushing down sales…

I think that what they are trying to say, is that the desire to own a home is falling. But we know that credit, unemployment, affordability, inventory, where we are in the cycle, consumer confidence, demographics, urban vs rural, and a host of other factors are influential in the buoyancy, or otherwise, of the housing market.