Demand Is Rising, Supplies Are Falling : Home Prices Set To Rise?

Home resales rose 4 percent last month, according to the March Existing Home Sales report. A total of 5.1 million homes were sold on an annualized, seasonally-adjusted basis.

The strong results re-establish the national, long-term trend toward rising home resales.

March marked the 6th month out of eight in which sales volume has increased and sales are up 32 percent from July 2010 lows.

Home supply has resumed its downward trajectory, too.

At the current pace of sales, the entire home resale inventory would be depleted in 8.4 months. This is 0.1 months faster as compared to February, and a full month faster than the 12-month average.

The Existing Home Sales report also included a breakdown by buyer-type.

• First-time buyers bought 33% of homes, down from 34% in February
• Repeat buyers bought 45% of homes, down from 47% in February
• Investors bought 22% of homes, up from 19% in February

35 percent of buyers paid in cash.

And, perhaps most noteworthy, according to the National Association of REALTORS®, 40 percent of March home resales were "distressed properties". Distressed homes include foreclosures, short sales, and REO and typically sell at discounts "in the vicinity" of 20 percent.

Home prices are based on the basic economic theory of Supply and Demand. So, with home supplies dropping and demand for homes rising, it's reasonable to expect home values to rise later this year.

If you're in the market for a home, play the recent trends to your advantage. Today, homes are affordable and mortgage rates are low. This may not be the case later this year. The best "deals" of the year may be what you buy now.