The national home supply is falling, down to its lowest levels since December 2008.

In June, there was 9.4 months of supply, down from a year-ago level of 11.0 months.  It’s one more sign that the housing market may be mending itself.

Housing supply is an important metric because home values across every U.S. market are rooted in Supply and Demand.  When the supply of available homes outpaces buyer demand, home values tend to fall.  And, by contrast, when homes are relatively scarce, values tend to rise.

We’re still a long way from historical averages, but dwindling home inventory may be one reason why the national median sale price rose by $7,000 last month. 

A reduction in inventory may also explain why two other popular home value metrics — the government’s Home Price Index and the private-sector’s Case-Shiller Index — are each showing signs of a rebound, too. 

However, before we get too excited, it’s important to remember that home sales of late have been spurred by low mortgage rates and by the First-Time Home Buyer Tax Credit.  A real estate trade group says first-timers represent 29 percent of the market, for example.

But so long as rates remain low and buyer stimulus is in place, we can expect that the recent trends in real estate will continue.  Inventory should continue to drop and prices should start to rise. 

Therefore, if you’re planning to buy a home in the next 12 months, buying sooner rather than later may be a smart way to save on your next home.

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Housing Starts soared in June, thumping analyst expectations for the second straight month.

A “housing start” is a new home on which construction has started.  Last month’s jump in single-family starts is the largest one-month jump since 2004.

To Wall Street, June’s figures are the latest signal that the country’s housing markets may be on the mend.

For home sellers, however, the news may not be so rosy.  With more homes expected to come on the market, price competition among sellers could intensify and — all things equal — that would push sales prices lower.

So far in 2009, that hasn’t happened. 

As home supply has grown, it’s been met by off-setting buyer demand.  Spurred by low mortgage rates and an $8,000 first-time homebuyer tax credit, Americans appear to find today’s home buying conditions somewhat ideal. 

As a result, purchase activity has been strong and first-time home buyers now account for close to 30 percent of existing home sales.

Rising Housing Starts can be a double-edged sword.  It shows strength that builders are more optimistic about the economy, but too much optimism can lead to a glut of unsold homes and that could reverse the recovery’s momentum.

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The government’s First-Time Home Buyer Tax Credit expires December 1, 2009. 

If you expect to use the program in conjunction with a home purchase, therefore, you may want to consider yourself officially “on the clock”. 

Assuming a 60-day window between contract and closing, there are now 77 days left to find a home and go under contract for it.

The First-Time Home Buyer Tax Credit refunds up to $8,000 at Tax Time for qualified home buyers.  A few of the program’s qualification criteria include:

• Home buyer must not have owned a primary residence in the past 36 months
• The home may not be purchased from a family member
• The household adjusted gross income must be below $95,000 for single tax filers and $170,000 for joint tax filers

The tax credit itself is limited to $8,000 or 10% of the purchase price, whichever is less. 

Remember, though: The refund is a true tax credit — not a deduction.  This means that a taxpayer owing $8,000 to the IRS and claiming the $8,000 First-Time Home Buyer Tax Credit would owe the IRS nothing on April 15, 2010.

The complete list of qualifying criteria is posted on the IRS website.

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For the fourth consecutive month, the country’s foreclosure activity was dominated by a small number of states.

As reported by RealtyTrac.com, more than 50 percent of the country’s foreclosure-related actions in June concentrated in just 3 states:

1. California
2. Florida
3. Nevada

The states rounding out the Top 10 include Arizona, Georgia, Michigan, Texas, Ohio, Illinois and Colorado.

Meanwhile, June’s reported foreclosure figures are consistent with the data from earlier this year, suggesting that the foreclosure remedy plans put forth by the government and by lenders can barely keep pace with the national default rate.

Foreclosure-related actions nationwide are up 5 percent from May.

The silver lining in data this negative is that foreclosures are creating tremendous buying opportunities for the right buyers.  Because foreclosed homes tend to sell at a discount versus non-foreclosed homes and because mortgage rates are low, home sales are showing strength in a multitude of markets because of ample supply at relatively cheap prices.

Distressed homes accounted for one-third of all existing home sales in May.

Search the complete June 2009 foreclosure report for yourself, including foreclosure heat maps and other trends on the RealtyTrac website.

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Once again, the housing market is showing that its worst days may be over.

According to the Census Bureau, the number of new homes sold in June leapt by 11 percent from the month prior.  It stands as the biggest one-month jump in 8 years.

A “new home sale” is when a home in any stage of construction — not yet started, under construction, or already completed — goes under contract, often with a builder.  It’s the opposite of an “existing home sale”.

In addition to surging sales, the monthly supply of new homes fell to its lowest level in 11 years.

Because home values are based on the relative supply and demand for a particular home in a particular area, anytime that demand for homes grows faster than supply, we would expect prices to rise. 

Indeed, that’s what we’ve been seeing.  The combination of low interest rates, seller-paid incentives and a first-time home buyer tax credit is bringing buyers into the market faster than new supply can come online.  It’s one reason why home prices have stopped falling across many parts of the country.

It’s also why home buyers may find it tougher to get “a good deal” in real estate later this year and into 2010.  If demand stays high and supplies fall further, sellers should regain the upper-hand in contract negotiations.

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For the first time in nearly six months, Fannie Mae is imposing strict, new guidelines on American homeowners. 

This time, the hardest hit demographic is owners of 2-unit homes.

In its official announcement, Fannie Mae listed the following changes to its 2-unit financing programs, separated by occupancy type.

Primary Residence

1. Purchase: Maximum loan-to-value drops to 80%; FICO minimums reset to 640.
2. Rate-and-Term Refinance: Maximum loan-to-value drops to 80%; FICO minimums reset to 640.
3. Cash Out Refinance: Maximum loan-to-value drops to 75%; FICO minimums reset to 680.

Investment Property

1. Purchase: Maximum loan-to-value drops to 75%; FICO minimums reset to 660.
2. Rate-and-Term Refinance: Maximum loan-to-value drops to 75%; FICO minimums reset to 660.
3. Cash Out Refinance: Maximum loan-to-value drops to 70%; FICO minimums reset to 680.

With Fannie Mae’s new loan-to-value limits falling by as much as 15 percent, it’s a certainty that fewer 2-unit homeowners will be approved in the mortgage process.  This could slow both purchase and refinance activity in the coming months.

The good news, though, is that while Fannie Mae recommends that lenders institute the new policy immediately, September 1, 2009, is the “effective date”.

Therefore, if you plan to buy a 2-unit home, or if you own one and know you’ll need to refinance it soon, it may be a good idea to move up your timeframe. 

Lenders could implement the new guidelines at any time and usually do so without warning.

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Mortgage markets worsened for the third straight Tuesday after the government reported June’s Retail Sales report came in slightly better than expected.

Since falling to near 5.000 percent last week, 30-year fixed conforming mortgage rates have risen by almost 3/8.

It’s a similar mortgage rate pattern to what we’ve seen over the last 10 months — rates drift down to near their “all-time lows”, and then surge higher over just a few days time.

This week’s movement, in particular, is vexing home buyers and would-be refinancers. 

Many people thought mortgage rates would break below the 5.000 percent threshold.  The markets, however, had other ideas.

In addition to the unexpectedly strong Retail Sales data, last month’s Producer Price Index reported higher than expectations, too. 

A rising PPI is important to rate shoppers because the figure is akin to the Cost of Living measurement for household, but for American businesses instead.  The thought goes that if business costs are rising, consumer costs will eventually rise, too, as businesses share their expenses with American households.

This is inflationary, of course, and inflation is awful for mortgage rates.  It’s part of the reason why mortgage rates closed higher again Tuesday.

All year long, mortgage rates have been jumpy and unpredictable.  This past week has been no different and it’s why you shouldn’t necessarily try to time for a market bottom with mortgage rates. 

If an interest rate looks good to you today and the payment is manageable, consider locking it in.  There’s no guarantee rates will ever fall back toward 5.

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The number of homes under contract to sell increased in May. 

It’s the fourth straight month in which sales volume increased, corroborating the growing notion that housing is on the mend in most U.S. markets.

Consider these other housing-related stories from the past month:

• Existing Home Sales are rising
• New home supplies are falling
• The Case-Shiller Index is turning positive-like

Put it all together and it looks like the housing market is about to reach its bottom (if it hasn’t already).

But just because homes are going under contract to sell doesn’t mean that they actually will sell.  A “deal” can fall apart for all sorts of reasons including failed home inspections, buyer-seller disputes, and mortgage-related problems.

In general, though, as the number of pending contracts increase, we find that Existing Home Sales rise, too, some 45-60 days into the future.  And so long as buyers’ demand for homes remains strong, we would expect that home prices edge higher.

It’s too soon to say that housing has turned the corner for certain, but there’s an awful lot of data lately that suggests that it has.

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If you’re going to put your home on the market soon, now is the time to start thinking about your curb appeal. And the physically largest part of a yard is often the grass. Crappy grass does not invite people into your property.

But here’s a free class:

The Home Depot is offering a seminar on April 26, 1-2 at all stores. You can register in person or online at www.homedepotclinics.com.

I was listening to Marketplace Money on Public Radio this morning and reporter Dan Gretch assured me that I hadn’t missed out on a foreclosed home bargain.  Sadly, I can’t find a link to the clip, so you’ll just have to believe me when I tell you more’s to come. That’s because some banks have been holding off on foreclosures - playing a wait and see game - until they saw Obama’s $75 billion plan to stem the foreclosure tidal wave.

Now that bankers know which homes can benefit from the plan - and those that won’t - they’ll likely take legal action on  those that won’t.

And the good news about shopping for a foreclosure property is that banks are also feeling the pressure of a flooded marketplace and are starting to play ball. 18 months ago if you were shopping for a foreclosed home and asked the bank to turn on the water for you, they would have told you to fly a kite. Today, they’re more likely to honor requests and may even make a few repairs.

A Webdig’s agent can help walk you through this. You can search listings HERE