The real estate market operates like the diagram above. One gear turns at its pace while turning other gears. At any time, one part of the market can slow down or speed up. A large pool of buyers competing for a smaller pool of sellers homes reduces inventory at a faster pace than what can be replenished.
When sellers are slow to put their homes up for sale, as happened in February when 33% fewer homes came on the market while buyers are buying at a pace 20% faster than last year, we end up in a sellers market.