Rise in Home Sales Signals Strengthening Market

The long-awaited housing recovery is beginning to blossom, according to industry experts taking a look at recent existing-home sales.

Paul Dales, chief economist at Capital Economics, says "it is clear that a housing recovery is now well underway."

Lawrence Yun, chief economist for the National Association of Realtors (NAR), concurs with Dales' assessment, saying "The pattern of home sales in recent months demonstrates a market in recovery."

The evidence: home sales have been on the rise for the past three months, posting a 5 percent increase in December.

In addition to the 5 percent increase in December, NAR reported a 1.7 percent annual increase in existing-home sales in 2011, a total of 4.26 million homes for the year.

Housing inventory is on the decline and fell to its lowest level since March 2005 last month, according to NAR. Approximately 2.3 million homes are available for sale currently.

"The inventory supply suggests many markets will continue to see prices stabilize or grow moderately in the near future," Yun said.

However, listed inventory is only part of the equation, and according to CoreLogic's latest numbers, shadow inventory stands at about 1.6 million.

Regardless, Dales believes sales will rise this year. "Housing still won't contribute much to GDP growth over the next few years, but at least it will no longer subtract from it," Dales says.