The two latest charts definitely indictate that a double bottom was reached in the residential real estate market in January 2009.   Keep in mind that while the chart shows much improvement, corrections do not move directly upward.  Expect some retracement and backfilling, while the chart continues its upward momentum.  Note support forming at around 5,000,000 units. 

Another factor in predicting a retracement may be the Uncle Sam factor.  Experts estimate that government efforts to modify loans, postpone foreclosures and provide $8000 in tax credits to buyers has artifically propped up prices 5 percent – 10 percent.  If the experts are correct, prices will decline, once the government stimulus is gone.

The chart of existing inventory on the market is nearly a mirror image of the existing home sales chart.   The current supply of 7.8 months of inventory means that it would take 7.8 months to sell all the homes on the market, if every qualified buyer purchased.  Keep in mind that this chart reflects the averages.  We are presently seeing less than 7.8 months of inventory for homes priced under 200,000 and up to a year of inventory for homes priced over $1,000,000. 

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