Inventories of homes for sale are so low this spring that bidding wars are breaking out in overheated real estate markets. Rising prices and shrinking supplies are hitting buyers with a double whammy as they anxiously scroll through limited choices to find a house to buy before prices and mortgage rates rise even more.

In California and Arizona, sales contracts are being consummated in 24 hours or less. These flash sales attest to the frenetic fever that’s infecting the hottest real estate markets, where inventories are 30 percent to 60 percent lower than a year ago.

What’s going on? In economics class, we were taught that demand coupled with short supplies results in higher prices, encouraging owners to sell and restoring equilibrium. In real estate markets, however, it’s just not that simple.

Here are the three major reasons that sellers aren’t selling even when prices are rising.

1. They owe more than their houses are worth. Though rising values are lifting many homeowners out of negative equity, 10.4 million homeowners (21.5 percent of all residential properties with a mortgage) were still in negative equity at the end of the fourth quarter of 2012, according to a recent CoreLogic report. Of the 38.1 million residential properties with positive equity, 11.3 million have less than 20 percent equity. These borrowers, referred to as “under-equitied,” may have a difficult time obtaining new financing to refinance or buy a new home due to underwriting constraints.

Under-equitied mortgages accounted for 23.2 percent of all residential properties with a mortgage nationwide in the fourth quarter of 2012. That’s a grand total of 44.7 percent of homeowners with a mortgage. Negative equity is a bigger problem in hot markets like California, Arizona, and Florida than elsewhere because those markets experienced greater swings in home values over the past seven years.

2. They can’t afford to buy. Most home sellers are also homebuyers. In hot markets, move-up buyers are having almost as hard a time as first-time buyers finding affordable houses. Unless they have owned their existing home for ten years or more and will realize a significant profit, move-up buyers may find themselves ending up with a loss.

3. They can’t get financing. Many move-up buyers are having the same (or worse) problems getting financing as first-time buyers. They haven’t been in the mortgage market since the tough new lending standards were enacted. FICO scores and down payments are higher, debt-to-income and loan-to-value ratios are lower, and, most importantly, documentation is tougher today, especially if you’re self-employed, paying alimony, co-signatory on another loan, or retired.

If move-up buyers can’t buy, they don’t sell. The result is a huge logjam in the housing ladder that makes it harder for first-time buyers to find starter homes and for empty nesters to sell the family home for something smaller.

Time will make all the difference. For seven years, most owners have postponed thoughts of selling. Although prices are rising suddenly in some markets, it doesn’t mean that homeowners are prepared to respond quickly. Families don’t easily make a major decision like selling their home and moving to a new one. Even when the decision is made, there are many steps involved in the process: preparing to sell, finding a new home, and rearranging the family’s life. It can take months before a house is ready to be listed.

Time will also see rising values lift more owners out of negative equity to put them in a position where moving will be possible. Sellers will sell in good time, and real estate markets that seem out of control today will return to a degree of normalcy.

Steve Cook is Executive Vice President of Reecon Advisors and covers government and industry news for the Reecon Advisory Report.

During his 30 year career in public relations and journalism, Cook has been a print and broadcast news correspondent, served two Members of Congress as press secretary, was a senior executive in the world’s largest independent public relations firm in Washington and Chicago and was vice president of public affairs for the National Association of Realtors from 1999 to 2007.At NAR, Cook supervised external communications including news and editorial coverage, video production, speech writing and communications strategic planning. He helped to manage NAR’s multimillion dollar network advertising program.

Cook is a member of the National Press Club, the Public Relations Society of America and the National Association of Real Estate Editors, where he served as second vice president. Twice he has been named one of the 100 most influential people in real estate. He is a graduate of the University of Chicago, where he was editor of the student newspaper. In addition to serving as managing editor of the Report, Cook provides public relations consulting services to real estate and financial services companies, and trade associations, including some of the leading companies in online residential real estate.