The number of homes listed for sale declined in many metropolitan markets last month.

The supply of homes available for sale in 29 major metropolitan areas in August was down 2.6% from a month earlier, according to figures compiled by ZipRealty Inc., a real-estate brokerage firm based in Emeryville, Calif. The ZipRealty data cover all listings of single-family homes, condominiums and town houses on local multiple-listing services in metro areas where the firm operates.

Ivy Zelman, chief executive of Zelman & Associates, a housing research firm, says inventory is falling largely because a large number of foreclosed homes are being sold at "distressed prices," which are dragging down prices for all types of homes.

On a national basis, home inventories typically grow modestly in August from July. Over the past 25 years, the average increase during August has been 2.2%, according to Zelman & Associates.

Although the supply is no longer growing quickly, it remains abundant. One reason for the recent declines in many cities is that potential sellers have withdrawn from the market because they don't want to compete with builders and banks that have been slashing prices in an effort to clear out their inventories of new or foreclosed homes.

Nationwide, 4.67 million previously occupied homes were listed for sale at the end of July, according to the National Association of Realtors. At the current sales rate, that's enough to last about 11 months, the trade group says. The housing market is considered roughly in balance between supply and demand when the inventory is enough to last around six months.

The August inventory was down about 8% from a year earlier in the 18 metro markets for which comparable year-earlier data are available, ZipRealty said.

The ZipRealty data don't include New York. But Miller Samuel Inc., an appraisal firm based there, says there were 6,094 cooperative apartments and condominiums available for sale in Manhattan at the end of August. That was down 5.3% from July but up 31% from August 2007. Losses of jobs on Wall Street are expected to weigh on the Manhattan market. Jonathan J. Miller, chief executive of Miller Samuel, sees the price trend as "flat to weakening."

Write to James R. Hagerty at bob.hagerty@wsj.com

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