Is this spring the time to buy?

The spring selling season is right around the corner. Could this be the right time to buy and get "off the fence?" Pending sales are up, inventory is down and some economists are predicting an end to the housing crash this year. What does this mean for home shoppers? How should it shape your strategy?

The latest numbers showed that the housing market isn't quite there: S&P/Case-Shiller's 20-City Composite Home Price Index fell 3.9% in the 12 months ending in December, and price declines escalated at the end of the year. The bad news was widespread, with 18 of 20 metros posting declines. Miami and Phoenix were the only markets to pick up at the end of the year, and Detroit was the only city to post an annual uptick.

The good news is there's really not much further to fall, says economist Paul Dales of Capital Economics. Case-Shiller's report showed prices dropping faster at a time when housing prices typically do decline. Prices continued to drop at a slightly faster rate at the end of the year, but Dales says they won't be dropping much longer.

"There are compelling reasons to believe that the end of the housing crash is finally in sight," Dales says.

That's because housing prices — now back at 2002 levels (2000 if you adjust for inflation) — are now below "fair value," or what market observers consider justified relative to incomes and market demand. Home prices are 10% below rents and 24% below disposable per-capita income.

The economy is stronger, banks are more willing to lend and mortgage rates are still hovering near historic lows.

And there are already signs that demand is coming back. Contracts to purchase existing homes neared a two-year high in January, rivaling the period before the expiration of the first-time homebuyer tax credit, according to the National Association of Realtors. Pending sales increased 2% in January over the previous month and 8% over January 2011. That figure also suggests that home sales will have increased again in February after ticking up in January.

Signs also indicate that a fair amount of excess inventory of housing has been wrung out of the market in the past year, which is good news for sellers but could mean buyers have a little less to choose from and a little less authority.

The inventory of existing homes for sale declined 21% in the year ending in January, bringing the supply to 6.1 months, the lowest level since April 2006. Of course, analysts say this not only was a matter of buyers snapping up foreclosure bargains but also had a lot to do with people taking homes off the market because of sluggish demand and falling prices.

More houses should hit the market in spring, analysts say, including a large number of bank-owned, or REO, properties that were held up in processing last year. With these distressed properties padding supply, prices should remain low for buyers this season.

Moreover, 51% of agents recently surveyed by Coldwell Banker said that sellers are more willing to price their home competitively this year.

Dales, for one, says he doesn't expect "significant and sustained" price increases until 2014 at the earliest.

The good news is that most buyers probably won't lose much equity with a spring purchase. If you're one of the millions facing rising rents, buying could be a smart move, provided you're willing to stay in the house for a while.

Housing market snapshot
Existing-home sales ticked up 0.7% to 4.57 million in January from 4.54 million during the same period a year earlier, according to the NAR. The sales represented a 4.3% increase from the 4.38 million homes sold in December, which is typically a slower month.


NAR chief economist Lawrence Yun says buyers are finally responding to favorable market conditions, including record-low mortgage rates and bargain home prices.

The U.S. median existing-home price declined 2% from January 2011 to $154,700, as distressed properties continued to figure prominently, accounting for 35% of all sales.