When it comes to the seasons of the housing recovery, experts say the market is finally in spring thaw mode, after several months of year-over-year gains in home prices and sales. That bodes well for the spring homebuying season, as would-be buyers emerge from winter hibernation and start their house hunts.
"This is the first spring season when the housing market is clearly in recovery," says Jed Kolko, chief economist at online real estate information site Trulia. "Before there was much more uncertainty about whether prices would rise, so this is the first season where most people expect prices to rise."
The prospect of prices rising further has made buyers increasingly impatient, but has had the reverse effect on sellers, many of whom are waiting to put their houses on market until prices rise even more.
That has severely constrained inventory in parts of the nation and pushed prices up, the dominating trend for the spring homebuying market, experts say. Here's a look at some other market trends for this spring homebuying season:
1. Tight inventory fuels home price gains: After bottoming out about a year ago, prices have been on a steady upward climb, recently posting an 8 percent gain year-over-year in January, according to the Standard & Poor's/Case-Shiller Home Price Index. That trend is likely to continue as the inventory of homes for sale remains tight through spring, experts say.
Although rising prices are drawing some sellers to the market, many are holding out for stronger price gains. That, coupled with fewer foreclosures on the market, has limited buyer choice and ultimately dampened gains in home sales. Where buyers are antsy to buy a home before prices and mortgage rates go up, sellers are waiting for strong prices gains.
"No one wants to sell at the bottom, so it will stay a seller's market in most parts of the country," Kolko says. "Even though in February inventory jumped even more than is typical for the season, inventory is still low, which will hold back sales."
The inventory issue isn't likely to get better until more new construction occurs, which is still very low relative to normal levels. The most recent numbers from the Commerce Department put annual housing starts at around 917,000 units. More normal levels are closer to 1.5 million, Kolko says.
"The construction rebound is very localized," he says. "The [San Francisco] Bay area has seen construction above normal levels but housing markets hit hard by the bust, like Phoenix and Las Vegas, are more attractive to investors than to builders."
2. Shift from distressed sales to conventional sales: While foreclosure information firm RealtyTrac reported 26 states reported year-over-year foreclosure inventory increases in the first quarter of 2013, overall inventory is still down almost 40 percent since its peak in 2010.
That's resulted in a shift to more conventional sales, according to experts, with foreclosures and distressed properties accounting for about one in every five sales today compared with one in every three sales in 2010.
"In most parts of the country the worst of the foreclosures crisis is now behind us," says Daren Blomquist, vice president of marketing at foreclosure information firm RealtyTrac. "The shadow inventory is shrinking."
3. Still cheaper to buy than rent: Even though home prices are rising, it's still cheaper to buy than rent in America's top 100 major metropolitan areas, according to Trulia's latest Rent vs. Buy Index.
Asking prices shot up 7 percent nationally year over year compared to just 3.5 percent for rents, but given today's low mortgage rates—about 3.6 percent on average at the end of March—buying is still a better call in many markets across the nation.
That bodes well for investors who can still take advantage of high demand for rental property and rising rents, Kolko says.
"There are fewer bargains out there but prices are still cheap relative to rents," he adds.
4. Financing remains an obstacle: Although rising home prices have made more house hunters keen to make offers, tight mortgage credit is still preventing many from closing deals. In addition, higher down-payment requirements remain a barrier, according to experts.
But it's not just consumers who are having trouble getting their hands on credit. Homebuilders, too, are facing tighter standards when it comes to accessing capital, which is further constraining the inventory of homes for sale. New construction has risen steadily from recession lows and is currently almost 28 percent above levels reported this time last year, according to the Commerce Department. Still, housing starts need to rise "at least 50 percent from current levels" to get back to a more normal rate and ease inventory constraints, Lawrence Yun, chief economist at the National Association of Realtors, said in a statement.
"Most local home builders are small businesses and simply don't have access to capital on Wall Street," Yun added. "Clearer regulatory rules, applied to construction loans for smaller community banks and credit unions, could bring many small-sized builders back into the market."