Home Inventories Plummet, Foreshadowing Higher Prices By Spring 2010

Home resales are soaring.

For the 4th consecutive month, the Existing Home Sales report revealed what today's buyers and sellers already know -- there's a lot of buyer activity right now.

Existing Home Sales surged 7-plus percent in November, posting its largest number of recorded sales in 33 months.  Sales volume is up 44% higher versus last year.

It's another example of the housing market in recovery.

There were other interesting statistics buried in the November data, too.  According to the National Association of Realtors:

1. 51 percent of home buyers were first-timers
   
2. Distressed properties accounted for one-third of all sales
   
3. The median home sale price rose slightly

But of all the stats from the November Existing Home Sales report, perhaps the most important one is the one showing home supplies falling to 6.5 months. It's nearly half of the home supply available last November.

The rapid run-off of inventory throughout 2009 is more than a trend at this point and suggests higher home valuations in 2010. Especially because mortgage rates are low, tax credits are available, and the press is giving housing positive coverage.

You shouldn't feel rushed to buy, but you probably don't wait too long, either.  The best deals of 2010 may be gone before that Spring Buying Season even starts.

When It's A Holiday Week, Mortgage Rate Shoppers Should Be Extra Vigilant

Mortgage pricing worsened Monday, driving mortgage rates to their highest levels since October.

The day's action was drastic, too. 

Some banks issued as many as 3 rate sheets Monday -- each worse than the preceding and one reason why rates got so bad, so quickly, is because this week marks the beginning of mini-Vacation Season on Wall Street. 

Between now and January 4, 2010, be prepared for big swings in pricing from day-to-day.  Shopping for a mortgage could be a challenge.

The relationship between vacation days and mortgage rate volatility is rooted in how mortgage rates are "made".

1. Conforming mortgage rates are based on the price of mortgage-backed bonds, a security that is sold on Wall Street
   
2. Mortgage-backed bonds can't sell without a bond buyer and a bond seller agreeing to a specific sale price

So, during vacation week, when the total number of market participants are less, there are fewer opportunities for buyers and sellers to meet at a specific price.  As a result, bond prices rise and fall with a higher velocity than on a "normal" day.  Rallies and momentum plays are exaggerated, too.

Now, mortgage market action like this can work in your favor, or it could work out of your favor. Unfortunately, on Monday, rates moved out of favor.

This rest of this week is stacked with market-moving economic data. The data could be better-than-expected, or worse-than-expected.  Either way, markets will react a little more feverishly than normal.  Therefore, if you have a chance to lock a favorable rate, consider taking it.

Before long, the rate could be gone.

A Simple Explanation Of The Federal Reserve Statement (December 16, 2009 Edition)

The Federal Open Market Committee voted to leave the Fed Funds Rate within its target range of 0.000-0.250 percent.

In its press release, the FOMC noted that the U.S. economy "has continued to pick up", that the jobs markets is getting better, and that housing market has shown "some signs of improvement" lately.

It's the fourth straight statement in which the Fed speaks optimistically about the U.S. economy -- a signal that the worst of the recession is likely behind us.

The economy isn't without threats, however, and the Fed identified several, including:

1. Tight credit conditions for consumers
   
2. Reluctancy of businesses to hire new workers
   
3. Lower overall housing wealth

The message's overall tone remained positive, however and inflation appears to be held in check.

Also in its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent "for an extended period" and to honor its $1.25 trillion commitment to the mortgage bond market.  That plan -- due to expire at the end of March 2010 --  should be noted by today's homebuyers. Fed insiders estimate that the program suppressed rates by 1 percent through 2009.

Mortgage market reaction to the Fed press release is negative.  Mortgage rates are rising this afternoon.

The FOMC's next scheduled meeting is January 26-27, 2010.

Foreclosure Activity Falls For The 4th Straight Month

Since peaking in July 2009, national foreclosure activity has dropped through 4 consecutive months. 

On a month-to-month basis, November's foreclosure activity fell another 8 percent. 

However, national foreclosure activity continues to be dominated by a minority of states.

As reported by RealtyTrac.com, more than half of November's foreclosure-related activity sourced from just 4 states:

1. California
   
2. Florida
   
3. Illinois
   
4. Michigan

These are the same 4 states that topped October's foreclosure activity despite three of them posting month-to-month declines last month.

The remaining Top 10 states in terms of total foreclosure activity include Arizona, Texas, Ohio, Georgia, Nevada and New Jersey.

If you've been actively looking at REO lately, you've likely noticed that true bargains are harder to find.  This is because buyers of all types -- first-timers, move-ups, and investors -- are purchasing bank-owned homes aggressively and getting better at identifying the "best ones".

But just because supplies are dwindling doesn't mean you should just jump in.  Buying foreclosures isn't for everyone for two very strong reasons:

1. Homes are often sold as-is and may have "issues"
   
2. The closing process can be unpredictable

Therefore, if you're thinking of buying a foreclosed home, be sure to talk with your real estate agent about potential problem before going under contract.  Better too soon than too late.

There are still good deals in the foreclosure market, but based on November's data, they may not last through the winter.  "Distressed home" sales now account for 30 percent of home resale activity.

How To Increase Your 2009 Mortgage Interest Tax Deduction

P>For many American homeowners, interest paid on a mortgage is tax-deductible in the year in which it was paid.

Knowing that, eligible homeowners can increase their 2009 tax deductions just by making their January 2010 mortgage payment before the end of the year.

By paying in 2009, the mortgage interest paid can be applied against 2009's itemized tax deductions even though the payment isn't technically due until 2010.

It can reduce your tax burden come Thursday, April 15, 2010.

And lest you think you're paying the mortgage "in advance", remember that mortgage interest is paid in arrears; a payment due January 1 accounts for interest that accumulated in December 2009 anyway. 

Tax planning is a complicated issue and not all homeowners qualify for mortgage interest tax deductions. Check with your tax professional before making tax planning decisions.

If you don't have an accountant you trust, call or email me anytime; I'm happy to make a recommendation to you.

Existing Home Sales Blow Past Expectations

Another month, another piece of evidence that the housing market is in recovery.

Existing Home Sales surged in October as the nation's homebuyers took advantage of low mortgage rates, low list prices, and, for some, a generous tax credit.

Home resales are 23 percent higher versus a year ago and home supply is down to 7 months nationwide.

Inventory hasn't been this low since February 2007.

The news shouldn't be surprising, however.  The same real estate trade group that produces the Existing Home Sales report also publishes a monthly report meant to predict future home sales called the Pending Home Sales Index.

Pending Home Sales have been through the roof since mid-May.

So, with pending home sales showing no signs of slowing and 80% of pendings turning into actual, closed sales, we can expect existing home sales volume to rise in the coming months, too.  Especially because Congress extended the home buyer tax credit to include (1) "Move-up" buyers and, (2) Buyers with higher household incomes.

It's terrific news for home sellers. The housing market turnaround means higher sale prices and fewer concessions to buyers long-term.

To buyers, on the other hand, the news isn't so good. The window to find a "deal" appears to be closing quickly.

Simple Real Estate Definitions : APR

APR is an acronym for Annual Percentage Rate.  It's a government-mandated calculation meant to simplify the comparison of mortgage options.

A loan's APR can always be found in the top-left corner of the Federal Truth-In-Lending Disclosure.

Because APR is expressed as a percentage, many people confuse it for the loan's interest rate.  It's not.  APR represents the total cost of borrowing over the life of a loan.  "Interest rate" is the basis for monthly mortgage repayments.

The main advantage of APR is that it allows an "apples-to-apples" comparison between loan products. 

As an example, a 5.000 percent mortgage with origination points and fees will almost certainly have a higher APR than a 5.500 percent mortgage with zero fees.  In this sense, APR can help a borrower determine which loan is least costly long-term.

However, APR is not without its shortcomings.

First, different banks includes different fees into their APR calculations.  By definition, this spoils APR as a choose-between-lenders, apples-to-apples comparison method.

And, second, when calculating APR, "life of the loan" is assumed to be full-term.  When a 30-year mortgage pays off in 7 years or fewer -- as most of them do -- APR comparisons are rendered moot.

In other words, APR is just one metric to compare mortgages -- it's not the only metric.  The best way to compare your mortgage options is to review all the loan terms together and determine which is most suitable.

Are There Any Foreclosure Deals Left?

For the eighth straight consecutive month, national foreclosure activity in the U.S. was dominated by a small set of states.

As reported by RealtyTrac.com, more than half of October's foreclosure-related activity came from just 4 states:

1. California
   
2. Florida
   
3. Illinois
   
4. Michigan

The remaining Top 10 states in terms of total foreclosure activity included Arizona, Georgia, Texas, Ohio, New Jersey, and Maryland.

Foreclosures are up 19 percent from last October, but a deeper look at the RealtyTrac report revealed two positive developments for the housing market.

1. Foreclosure activity is down 3 percent from last month
   
2. Foreclosures per Household decreased in 9 of the 10 most heavily concentrated states

Furthermore, Nevada's foreclosure pace is down 4% from last year.  This is a big deal because Nevada has long led the nation in foreclosure-related activity. Until last month, Nevada's year-to-year foreclosure rate hadn't fallen in more than 4 years.

It's too soon to say that the foreclosure market is drying up, but bargains are getting harder to come by.  First-time buyers and bona fide investors alike have been snapping up property at a furious pace.

According to an industry trade group, distressed homes account for nearly one-third of home resale activity.

That said, buying foreclosures isn't for everyone.

For one, properties are often sold as-is and may be defective.  The cost of repairs may negate "the deal" or "the steal" -- depending on the cost of the home.

Secondly, closing on a foreclosed home can be a 3-month long process. This is because banks rarely process home sale paperwork as fast as a "person" would. A 3-month timeframe may not fit your schedule.

In the end, fundamentally, buying a foreclosed home is the same as buying a "regular" home -- there's a contract and a closing.  Most of the steps in the middle, however, are different. 

Read the complete foreclosure report and take a peek at the foreclosure heat maps on the RealtyTrac website.  If you like what you see, talk to your real estate agent about what to do next.

There's still good deals in the foreclosure market, but based on October's data, they may not last through the winter.

Banks Raise Mortgage Qualification Standards

Despite the economy's improvement and prodding from Congress, banks don't seem ready to open their purse strings just yet.

Nationally, mortgage approval standards are tightening.

The data comes from a quarterly survey the Federal Reserve sends to its member banks.  The Fed asks senior bank loan officers around the country whether "prime" residential mortgage guidelines had tightened in the last 3 months.

For the period July-September 2009:

• Roughly 1 in 4 banks said guidelines tightened
  
• Roughly 3 in 4 banks said guidelines were "basically unchanged"

Just one bank said its guidelines had loosened.

Combine the Fed's survey with recent underwriting updates from the FHA and from Fannie Mae and it becomes clear that mortgage lenders are much more cautious about their loans than they were, say, 2 years ago.

Today's borrowers face a host of hurdles including:

• Higher minimum FICO scores
  
• Larger downpayment requirements for purchases
  
• Larger equity positions for refinances
  
• Lower debt-to-income ratios

In other words, mortgage rates may stay low into 2010, but that won't matter to homeowners that don't meet minimum eligibility standards.  With each passing quarter, that list gets smaller.

Therefore, if you're on the fence about whether now is a good time to buy a home, remember that, along with an increase in mortgage approval standards, home values are rising, too. 

Acting sooner is probably better than acting later.

FHA Streamline Refinance Program : There's 5 Days Left

>Consider this a last call for FHA Streamline Refinances.  Starting next Tuesday, the popular rate-lowering program gets strict on borrowers.

There's 5 days left.

Under the current streamline refi guidelines, FHA homeowners have minimal program eligibility requirements.

• FICO scores must be 620 or higher
  
• The refinance must provide a "tangible benefit"
  
• No mortgage lates allowed in the last 12 months

Beyond that, everything else goes, practically.  There's no income, asset, or job verification with the current FHA Streamline program. Neither is there an appraisal requirement.  It doesn't matter if you're 50% underwater.

Until next week, that is. 

Beginning November 17, FHA Streamline Refinance applicants must show evidence of income and employment, plus proof of cash required to close. Furthermore, the FHA is limited loan-to-values to 97.75% for homeowners that want to "roll closing costs" into their mortgage.

In areas of declining home values, this may render refinancing impossible.

There's more changes, too, as highlighted by the Federal Housing Commissioner. Read up for yourself, or ask a mortgage professional for help.

If you're a homeowner and you're currently financed through the FHA, it may be prudent to explore the possibility of an FHA Streamline Refi.  Mortgage rates are low right now and FHA guidelines are loose.

Starting next week, FHA Streamlines will be a completely different beast.

What's Ahead For Mortgage Rates This Week : November 9, 2009

Mortgage markets were extremely volatile last week, carving out a wide range between Monday and Friday. 

Thankfully for rate shoppers, the overall momentum was positive.

Mortgage rates fell for the second time in as many weeks. Rates still sit higher versus their early-October lows.

For pure "news", last week was a busy one:

• The Federal Reserve held the Fed Funds Rate near 0.000 percent
  
• The Unemployment Rate crossed 10 percent
  
• The First-Time Home Buyer Tax Credit was extended to April 2010

Combined, the 3 events reinforced the growing belief on Wall Street that the U.S. economy is in recovery, but not yet out of the woods.  This particular philosophy has been excellent for mortgage rates, helping to hold conforming 30-year fixed mortgage rates near 5.250 percent since the start of the year. 

It helped rates last week, too.  But low rates aren't without threats. 

For one, the Fed's vote to hold the Fed Funds Rate near 0.000 percent will eventually spark inflation concerns.  When it does, mortgage rates will rise. That won't be this week, though.

Actually, nothing may happen this week -- there's not much data to release.  Apart from a retail report, a confidence survey and some Fed speakers, the calendar is bare.  That, and Wednesday is a federal holiday.

However, without data, markets often trade on things like geopolitics, or energy concerns, or momentum.  In other words, don't be lulled into thinking rates won't change this week.

At least for now, the mortgage rates look good. By the end of the week, that may not be the case.

Congress Expands And Extends The First-Time Home Buyer Tax Credit

Congress both extended and expanded the First-Time Home Buyer Tax Credit program Thursday. 

The White House says the President will sign it into law today.

The up-to-$8000 tax credit's expiration date has been pushed forward to spring, requiring homebuyers to be under contract by April 30, 2010, and to be closed by June 30, 2010.

The program's basic eligibility requirements remain the same:

• Buyers can't purchase the home from a parent, spouse, or child
  
• Buyers can't purchase the home from an entity in which they're a majority owner
  
• Buyers can't acquire the home by gift or inheritance
  
• All parties to the purchase must meet eligibility requirements

The new law includes some notable updates, however. 

For one, the definition of "first-time home buyer" has been expanded to include most homeowners with at least 5 years in their current home.  "Move-up" buyers like these are now eligible for IRS tax credits, but with a cap at $6,500.

This means that you don't have to be a true first-time home buyer to claim the "first-time home buyer tax credit".

Other eligibility changes include:

• The subject property's sales price may not exceed $800,000
  
• The subject property must be a primary residence
  
• Income thresholds raised to $125,000 for single-filers and $225,500 for joint-filer

And remember, the First-Time Home Buyer program grants a tax credit as opposed to a deduction.  This means that a tax filer would receive a cash payment of $2,000 from the U.S. Treasury if his "normal" tax liability totals $6,000 and he was eligible for all $8,000 available under the new law.

The complete list of qualifying criteria is posted on the IRS website.  Be sure to review it with a tax professional to determine your eligibility.  Then mark your calendar for April 30, 2010.

It's 5 months away.

A Simple Explanation Of The Federal Reserve Statement (November 4, 2009 Edition)

The Federal Open Market Committee voted to leave the Fed Funds Rate within its target range of 0.000-0.250 percent.

In its press release, the FOMC noted that the U.S. economy "has continued to pick up" since the September FOMC meeting and that housing market activity has increased.

It's the third consecutive post-FOMC statement in which the Fed speaks optimistically about the U.S. economy -- a signal that the recession is likely over.

The economy isn't without threats, however, and the Fed identified several in its announcement, including:

1. Ongoing job losses for American workers
   
2. Reduced fixed investment by businesses
   
3. Ongoing challenges for the financial markets

The overall tone remained positive, however, as inflation appears to be held in check.

Also in its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent "for an extended period" and to honor its $1.25 trillion commitment to the mortgage bond market.

The Fed plans to wind down its mortgage market support over the next 5 months, reaffirming its March 2010 exit date.  For now, Fed support helps hold mortgage rates down.

Mortgage market reaction to the Fed's press release is negative overall.  Mortgage rates are rising.

The FOMC's next scheduled meeting is December 15-16, 2009.

Because Of The Federal Reserve, You Should Lock Before 2:15 PM ET Today

The Federal Open Market Committee caps off a scheduled, 2-day meeting today in the nation's capital, its 8th meeting of the year.

The group adjourns at 2:15 PM ET and, as is customary, will issue a press release reviewing its monetary policy and the health of the U.S. economy. 

The FOMC's post-meeting statements are brief but comprehensive. They're a window into the mind of the Federal Reserve and Wall Street picks apart every sentence for clues.

It's why FOMC meetings tend to shake up the mortgage markets -- for good and for bad. 

After its September 2009 meeting, the FOMC said in its press release:

1. Financial markets have improved
   
2. Housing activity has increased
   
3. Economic activity has "picked up"

Since September, the momentum has picked up.  Credit risks have reduced further, home sales are surging, and, although unemployment remains high, the Fed remains optimistic about a full economic recovery.

Today's FOMC press release will be closely watched. If the Fed alludes to strong growth with inflation in 2010, mortgage rates should rise. Reference to slower growth should help keep rates steady.

The FOMC is expected to leave the Fed Funds Rate within its target range of 0.000-0.250 percent -- the lowest it's been in history.  However, it's what the Fed says Wednesday that will matter more than what it does.

If you're floating a mortgage rate or wondering if the time is right to lock, the safe approach is to lock prior to 2:15 PM ET Wednesday.

Higher Home Prices Ahead, Says The Pending Home Sales Index

The housing market continues to steam forward.

As reported by the National Association of Realtors®, the Pending Home Sales Index posted its 8th consecutive monthly gain in September.

It's the longest winning streak in the history of the index and Pending Home Sales are now at their highest levels since December 2006.

A Pending Home Sale is a home under contract to sell, but not yet closed.  It's the precursor to an Existing Home Sale. 

Trade group data shows that nearly 80 percent of "pending" homes close within 2 months.  The majority of those remaining close within months 3 and 4.

When the Pending Home Sales Index rises, it tells us that market activity has picked up.  September's data confirms what we've been noticing since February -- the Buyers Market is ending.

With more homes under contract in the marketplace, homebuyers typically face one or more of the following:

   1. Competitive, multiple-offer situations
   2. Reduced purchase price leverage over sellers
   3. Fewer seller concessions

Therefore, if you're buying a home in the next several months, know that the 8-month run in Pending Sales will lead to a run in closed sales.  It should result in higher home prices, too

Indeed, we're already seeing it.

What's Ahead For Mortgage Rates This Week : November 2, 2009

Mortgage markets improved last week after a series of hugely volatile trading sessions. 

Rates carved out a wide range on the week, culminating in a late-Friday plunge that dropped rates by about 1/8 percent.

It was the first time in 5 weeks that mortgage rates fell.

Volatility like that of last week is nothing new on Wall Street; it's been a running theme in 2009.  Volatility occurs when markets don't agree on what's next for the economy and, this year, there's been a lot of disagreement like that.

Data has been inconsistent.  Take last week for example.

At 9:00 AM Tuesday morning, the Case-Shiller Index showed home prices rising nationwide.  Because many analysts believe housing fueled the recession, strength in the sector is widely construed a positive for the economy.

Mortgage rates rose on the news.

But then, an hour later, the national consumer confidence report revealed a substantial deterioration in sentiment versus the month prior.  The data forced Wall Street to do an about-face.

Housing is important to the economy, but it can't affect growth like consumer spending can. When Americans are less confident about their future income, they tend to keep their wallets closed, retarding economic growth.

Holiday Shopping Season is getting underway and the last thing businesses want to see is a suddenly reserved American shopper.

This week, the volatility should continue. 

In addition to the release of key employment and housing data, the Federal Open Market Committee has a scheduled 2-day meeting.  The group's Wednesday afternoon adjournment will influence mortgage rates.

The Fed is widely expected to keep the Fed Funds Rate in its target range near 0.000 percent, but it won't be what the Fed does that will matter as much as what the Fed says.

If the FOMC's press release shows optimism for the economy, mortgage rates will rise in response.  Alternatively, if the Fed appears more dour, rates will fall. 

Either way, consider locking your rate before the Wednesday afternoon announcement.

How To Find Good Deals As The Buyers Market Comes To An End

At some point in their lives, every home buyer in America has wondered "Is now the best time to buy a home?" In this 3-minute video, NBC's The Today Show does a good job of answering the question.

The conclusion? Yes, but not if you're going to overpay.

The Buyers Market is ending, we learn, as home prices rise across most of the country.  Pockets of opportunity remain, however, and the focused home buyer can still find a "good deal".

Some of the video's tips include:

• On what types of homes can you get the best prices
  
• What you can learn from looking in a seller's closet
  
• How to identify a desperate seller

The piece also goes negative on short sales, noting the amount of time required to buy one.  Short sales typically do take longer to close versus a "traditional" purchase, but that doesn't mean they should be avoided. 

There's plenty of bargains in the short sale arena, too.

What The Media About September's New Home Sales Report

Some days, newspaper headlines are a terrible place to get your real estate news. 

Today is one of those days.

After the September New Home Sales report showed sales volume down from August, the mainstream media jumped on the story:

• New Home Sales fall a surprising 3.6%
  
• Surprise Drop In New Home Sales
  
• Stocks slide as New Home Sales fall

But the headlines miss the point, somewhat.  Yes, home sales volume is important to housing, but it's not as important as home supply.

A deeper look at the New Home Sales data reveals an interesting comparison point:

• New home sales volume fell 3.6%
  
• The number of new homes available for sale fell 3.8%

In other words, sales outpaced supply -- a running theme this year and a positive signal for housing.

Since peaking in January 2009, the supply of newly-built homes has now dropped by 40 percent.  The average sale price is up 15% over the same period.

This is why you can't get your real estate news from the headlines.  You have to dig a little bit deeper to get the real story.

September's New Home Sales report was plenty strong.  The housing market recovery continues.

Previewing The New Good Faith Estimate

The new Good Faith Estimate makes its debut January 1, 2010.

Expanded from 1page to 3, the legislators responsible for the new Good Faith Estimate want it to be simpler for homeowners and home buyers to understand than the former version.

By most accounts, Congress will meet this goal. 

The new Good Faith Estimate includes plain-English explanations of every fee, charge, and interest payment involved in a purchase or refinance.  It also includes a section called "The Shopping Cart" in which applicants can compare lenders.

The new Good Faith Estimate is concise, too.  Using a series of "Yes/No" checkboxes on Page 1, mortgage lenders specifically note:

• The interest rate on the mortgage
  
• Whether the interest rate can change over time
  
• Whether the loan carries a prepayment penalty
  
• The length of the rate lock

Currently, this information is spread across 3 separate forms. 

Furthermore, the new Good Faith Estimate simplifies rate-and-fee comparisons, showing applicants how a lower rate can be available for a higher set of fees, and vice versa.

For all of its clarity, though, the new Good Faith Estimate still fails to address the issue of "suitability".  As in, is this the right loan for the right borrower?  That's something only a loan officer can do.

For suitable advice, talk with a loan officer who both listens to your needs and helps you plan for them.  Great terms on an unsuitable loan are often worse than "good" terms on the right one.

Home Values In 95% Of Case-Shiller Markets Are Improving Year-To-Year

For August, the Case-Shiller Index showed annual home values improving across 19 of 20 U.S. markets. It's the first time in 3-plus years that the benchmark housing index has shown such strength.

According to a Case-Shiller Index spokesperson, "The rate of annual decline in home price values continues to improve."

It's yet another sign that housing may have already bottomed.

However, just because the Case-Shiller Index shows a stabilization in home values, that doesn't necessarily make it true. This is because real estate happens on the local level and the Case-Shiller Index is more "national". It tracks data in just 20 U.S. cities.

Homeowners everywhere else are unaccounted for.

Furthermore, even within the 20 tracked Case-Shiller markets, there's no allowance for the natural sub-markets that exist. Some neighborhoods under-perform and some neighborhoods out-perform.

Case-Shiller treats them all the same.

Despite its imperfections, though, the Case-Shiller Index remains a helpful, broader measurement of U.S. real estate. Economists believe that housing led the U.S. into the recession and they believe housing will lead us out, too.

If that's true, August's Case-Shiller data is another step in the right direction.

Falling Home Supplies Mean More Multiple-Offer Situations For Buyers

The national housing supply fell to a 2-year low last month, according to the National Association of Realtors®.

At the current sales pace, existing home inventories would sell out in 7.8 months -- 30 percent faster versus November 2008.

For a 10-month window, that's a major housing supply reduction and it helps to explain why multiple-offer situations have been so common lately.

Moreover, the same report from NAR showed sales activity reaching its highest point since July 2007, too.

If you're looking for evidence that the long-standing Buyers Market is ending, this month's Existing Home Sales report might be it.

Even median sales prices -- typically dragged lower by distressed and foreclosed properties -- declined at its slowest pace in a year. The market may have turned a corner.

Home prices are rooted in the basic economics of supply and demand.

• When supply outweighs demand, home prices fall
• When supply lags demand, home price rise

Since March 2009, the market has been moving in the right direction. Low mortgage rates, ample housing supply and a first-time home buyer tax credit fueled buy-side demand so that home prices are now rising in many U.S. markets.

If home supplies stay on this path into 2010, expect home prices to rise even more.