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Are we still in a housing recession?  It appears so.  However, markets are starting to see signs of life. That means the window to get the best buys will soon close.

The California Association of Realtors most recent report notes that state-wide inventory is going down from 11 months on hand a year ago to 9 months. That's faster than the national average, which has climbed to 11 months, according to the National Association of Realtors.  Have you heard the old saying, "as goes California, so goes the nation".  It is time to take a good look at what may be occurring in the state.

The reason sales are slowly turning around is that smart homebuyers recognize that prices will recover and they would prefer to benefit from the next boom than have someone else benefit. 

Does anyone remember 1991 when home prices crashed more than 12 percent, according to economist Robert Shiller?  By 1992, inventory had built up to 8.5 months on hand. Only a year later, inventory reduced to 6.2 months on hand. By 1995, a buyer's market was in full swing, with only five months of inventory on hand.  To put that in perspective, even at the top of the housing boom in March 2005, homes on hand never dipped below four months on hand.

It gets better. In the four-year recovery period between 1992 and 1995, home prices rose $38,225, or 39 percent.  Residential real estate rose 20 percent between the volatile years of 1990 to 2000. After that, it doubled through 2007.

Is it different this time?  It doesn't appear that way so far.  With home prices eight percent below a year ago, or 15 percent below if you prefer Shiller's numbers, buyers are starting to think strategically. Why? Because busts never last either.

While inventories are at near-record highs, low interest rates and lower prices are making home ownership irresistible again.  And we all know what happens next.  Buying begins.  Smart buyers know to buy on the news and the worse it is, the better price they will get.  Inventories will be lower and lower inventories are invariably followed by higher prices. 

Once real estate prices turn around, buyers will be on the road to equity building, they will be in a better house and they will have an interest rate at a record low level. 

That's why homeownership is a long-term strategy.  With inventory decreasing from 11 to 9 months, it is time to take a good look.  Look back at 1992 and ask yourself, do you want to take advantage of the next wave of equity building or do you want someone else to have it?

The Real-Time Housing Market Report shows an interesting trend. Housing prices are only down a little over .05 percent.  That's a big improvement over March when the listing prices fell 2.7 percent.  And in 25 markets, only 7 markets fell in asking price.

The largest three-month declines are in Vegas (off 5.1 percent) and Philadelphia (down 4.5 percent.)  But the housing slump appears over in Denver, where listing prices rose 2.6 percent and in Charlotte, up 2.1 percent.  Prices also increased by more than one percent in Boston, Houston, Dallas and San Francisco. Asking prices stayed flat in San Diego, Minneapolis and Salt Lake City.

Research director for Real IQ Stephen Bedikian says, "We are now seeing price stability or price increases in most markets. Only the most troubled markets, Las Vegas, Miami, Tampa, Philly and Phoenix have continued price declines."

Days on market have gone down from 122 in February, to 119 in March to 111 in April, which is also a positive trend. Austin, Texas, sold homes the fastest at 67 days on market.

That means it's time to carefully watch inventory build-up. It's spring so it's natural for more homes to come on the market, but it's begining to look like some markets may have bottomed in February.

Should you listen to the media? 

The financial press is worried that they might have gone too far with their housing data, paralyzing the nation into recession.  So they're finally beginning to question the indexes where they get their data.  Indexes can be misleading because of the locations, prices, types of housing, and rates of increase they track.

In late April, Robert Shiller, founder of the Case-Shiller Index, announced that there was a good chance housing prices would fall further than the 30 percent drop during the Great Depression.  Shiller has plenty of reason to be negative; he makes money when people buy housing hedge funds through his company. 

One brave journalist, Chris Plummer of Marketwatch, is writing that Case-Shiller is flawed.  Plummer slammed both Shiller's Index and the Associated Press for their negative reporting.  When Shiller says home prices are going to fall 30 percent, no one asks why with unemployment rate is a little over 5 percent.  What's going to drive home prices that low?  Also, the glaring discrepancy in this case is that 17 of the 20 metro areas posted record annual declines, yet 78 percent of the 330 metropolitan regions tracked by the National Asso. of Realtors reported price increases. 

And S&P Index Committee Chairman David Blitzer acknowledged his organization's overall metro-market readings paint an incomplete picture. The Index covers only 20 markets, heavily weighted to the most volatile metros in the nation.

What this means is not only are the indexes misleading, the reporting is worse.  Right now we have mortgage interest rates three points below historical norms. We have housing inventories five months greater than balanced markets. Combine that with unemployment that is a half percent lower than the recession of 2003, and you have excellent homebuying conditions.  Don't listen to the media.  Go buy a home.