Is the Housing Crisis Easing?

As evidence for a brighter outlook for housing, Cyran and Crane point to the rising stock of America's biggest homebuilders, as well as reduced inventories of unsold houses. While there are still some major challenges ahead, they believe that an economic recovery and market conditions favor a return to a healthier housing market.

"Lurking in the background, however, is the so-called shadow inventory - homes that will eventually be put up for sale due to foreclosure. In February, the U.S. government estimated that there were 3.6 million vacant homes being held off the market. More of this inventory may soon move out of the shadow as banks, which recently agreed to a $25 billion foreclosure settlement, work through their backlogs.

Even so, there are several reasons why remaining inventory may dissipate quickly. First, homes have become much more affordable...Second, there's a large group of potential buyers sitting on the sidelines. Having a steady income is a key factor in being able to rent an apartment or get a mortgage. With unemployment rising from 4.4 percent in 2007 to 10 percent in 2009, that security was lacking. But unemployment is now dropping, reaching 8.3 percent in January. That could nudge people back into the market for housing. Finally, once residential housing does turn up, the recovery could feed upon itself."