Opinions differ as to when the housing market will turn around. Most analysts think that we have not yet hit bottom. Some think we might be close. One of the keys to the puzzle is the state of the housing inventory.

In May, there was a 10.8-month supply of homes for sale at the current sales pace, according to the National Association of Realtors (NAR). This was a move down from an 11.2-month supply in April. When the supply reaches the six- to seven-month level, the housing market should pick up, barring a major recession or a big jump in inflation or interest rates.

Opinions differ as to when the housing market will turn around. Most analysts think that we have not yet hit bottom. Some think we might be close. One of the keys to the puzzle is the state of the housing inventory.

In May, there was a 10.8-month supply of homes for sale at the current sales pace, according to the National Association of Realtors (NAR). This was a move down from an 11.2-month supply in April. When the supply reaches the six- to seven-month level, the housing market should pick up, barring a major recession or a big jump in inflation or interest rates.

Lawrence Yun, NAR’s chief economist, thinks that pent-up demand will help fuel a recovery in the housing market. According to Yun, the current volume of home sales is at the same level it was a decade ago.

But the population has grown by 25 million people since then, and there are 10 million more jobs. He believes that the housing market in many areas will stabilize by year end. Less optimistic economists see an improvement by the end of 2009.

Although inventories of homes for sale remain high, housing starts have plunged. Karl Case (S&P/Case-Shiller Home Price Index) notes that new-home starts nationally dropped to 975,000 in April. They peaked at 2.27 million in January 2006.

In the past, when housing starts fell from 2 million-plus to below 1 million, the housing market rebounded within a quarter. Case believes this could happen again if we don’t slip into a severe recession. Even so, it could take another five to 10 years for home prices to recover from steep declines.

HOUSE HUNTING TIPS: For buyers and sellers trying to make a decision about when to make a move, it’s important to consider that residential real estate is a local business. Looking at national statistics gives you a general idea of market trends, but it may not reflect price changes in your neighborhood.

You can get a sense of how sales are going in your neighborhood by keeping track of whether the listing inventory is rising or falling. Also, is it taking longer to sell or is the selling time shortening? Finally, have prices stabilized?

Buyers are at an advantage when there is more inventory to choose from and less competition from other buyers. However, prices could dip further before leveling out or rebounding. So, this is not a good time to buy for the short term. Case points out that long-term buyers who bought in the top-20 U.S. metro markets in 2000 saw their homes appreciate by 70 percent between then and now.

You can be successful selling in this market if you’re smart about how you go about it. First, you need to assess your motivation. Do you need to sell, or do you want to sell only if you get the right price? If that "right price" is out of line with what the market will bear, you should save yourself the effort.

The formula for selling today is straightforward: Emotionally detach yourself from your home; hire an experienced agent who will provide superb merchandising — exposure is the name of the game; put your house is top condition; price it right; and be realistic when you receive an offer from a qualified buyer.

Unless you’re home is in one of those desirable locations with low inventory, you can’t afford to haggle over price with a qualified buyer if you really need to sell. There are plenty of other homes for buyers to buy.

THE CLOSING: Or, they can just wait until the right one comes along, at the right price.

Dian Hymer is a nationally syndicated real estate columnist and author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer’s Guide," Chronicle Books.

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