The pending home sales index for January had the highest reading since April of 2010, when the first-time homebuyers tax credit expired. Sales in the South were especially strong, up by more than 10 percent from year-ago levels. New and existing home sales also have shown a similar upward trend, and inventories of both have fallen to a more normal range of close to six months of sales. At the trough of the downturn, the range was near 10 months of sales.

But these positive signs must be viewed with some caution. Monthly data are always erratic, especially in the winter months when weather can be a very important factor. In the case of this winter, an unusually mild January likely boosted sales in the Midwest and Northeast. More importantly, though, the sources of long-term drag on the housing market remain. Despite some improvement in the job market and an increasing willingness by lenders to allow modifications and/or refinancing, we are still likely to see more than 900,000 foreclosures in both 2012 and 2013.

For a more in-depth analysis, see the latest Housing Market Monitor.