Inventories are at historic lows, list prices have strengthened over the past 12 months and demand is healthier.  The February data from Realtor.com paints a positive picture for the coming recovery.

With the spring home buying season just weeks away, three critical metrics tracked by Realtor.com are substantially improved over a year ago.  The total US for-sale inventory was down by 22.02 percent in February compared to 2011 and declined in all but two of the 146 markets covered by Realtor.com. The median age of the inventory fell to 9.76 percent on a year-over-year basis, while the median national list price is up by 6.82 percent.   The nation’s housing markets as a whole are in better shape today than at any time since the 2009-2010 tax credits.

The nationwide median list price for single family homes, condos, townhomes and co-ops in February was $188,000, up from $185,500 in January and 6.82 percent higher compared to a year ago.  At the same time last year-roughly the beginning of the 2011 home buying season–the median national list price stood at $176,000, 6.88 percent below the median list price in February 2010.  While higher list prices do not always translate into higher sales prices, they may nevertheless signal a growing optimism on the part of sellers that the market has begun to turn around.

The national for-sale inventory was relatively stable in February (+0.54 percent), reversing eight consecutive months of decline but consistent with the onset of the spring home buying season. More telling is that the total number of listings on Realtor.com was 22.02 percent below the levels observed in February 2011.  This favorable trend again represents a considerable improvement over conditions observed at the beginning of the 2011 home buying season, when for-sale inventories were down by 4.96% compared to the previous year (February 2010.)

The dynamics of recovery and market reversal are remaking the geography of conditions across the nation.  Many markets in areas hardest hit by foreclosures and low prices at the beginning of the housing decline, such as Florida markets and Phoenix, continue to register large year-over-year declines in inventories and large year-over-year increases in median listing prices.  At the same time, median list prices in other markets once the epicenter of the housing boom — including Las Vegas and many parts of California – continue to lag behind the country as a whole.  Finally, markets that never experienced the dramatic run-up in housing values that preceded the housing crisis nor the subsequent decline, are suddenly suffering declining prices. Chicago, Knoxville, Detroit and Milwaukee-have registered some of the largest declines in their median list prices on a year-over-year basis as the impact of a weak economy continues to take its toll.

Declines resulting from the processing slowdown and increases due to economic factors and increases in negative equity-are having their impact on both prices and inventories.  However, inventories will certainly increase in the coming months, especially in judicial states like Florida, as lenders process and list the huge backlog freed by the recent multi-state Attorneys General agreement. The so-called shadow inventory of potential foreclosures now stands at an estimated 1.6 million units-almost the same as the total for-sale inventory (1.8 million) in February.  Unless properly managed, the disposition of these properties could easily undermine the progress that has been made to date in many markets.

For sale inventories in February declined in all but two of the 146 MSAs monitored by Realtor.com compared to a year ago, with the for-sale inventory in more than half of all markets (79) dropping by 20 percent or more.  In February 2011, market conditions were not as favorable.  While inventories had begun to decline in many markets, the declines were smaller and not nearly as widespread-one year ago, only 96 markets had experienced a year-over-year decline in their for-sale inventories and only 5 markets had dropped by 20 percent or more.

Areas experiencing the greatest year-over-year reductions in their for-sale inventory in February 2012 also looked very different than they did a year ago.  In February 2012, the 10 MSAs with the greatest declines were concentrated in Florida, Arizona, and California-areas that have been among the hardest hit by the housing crisis. In February 2010, the 10 MSAs with the largest percent declines in their for-sale inventories were primarily small Midwestern areas.