KEY DATA: Sales: +4.4%; Over the Year: +5.9%; Prices (Over-Year): +6.8%; Inventory (Over-Year): -6.6%

IN A NUTSHELL: “Home sales are on the rise despite the rapid rise in prices.”

WHAT IT MEANS: Economic growth during the first part of the year may have been disappointing but the housing market decided not to participate in the slowdown. According to the National Association of Realtors, sales of existing homes rose solidly in March with the pace being the highest since February 2007.   The recession is over, long live the recovery, at least the housing rebound. The March increase was spread across most of the nation, though there was a small decline in the West. It was also fairly evenly distributed between single family and condo purchases. The increase in demand is happening despite a sharp rise in prices. That is the result of limited inventory. The number of homes for sales was down quite a bit from a year ago despite an increase in March. A rising sales pace and a declining supply can only lead to one thing, higher prices and we certainly are getting that.

MARKETS AND FED POLICY IMPLICATIONS: Is the housing market in good shape or is it in trouble? Rising sales are a sure sign that there are lots of people out there who are ready, willing and able to purchase homes. But the problem is that there simply is not enough product for buyers to choose from. Housing starts are starting to come back but probably need to rise about 20% to 25% to reach levels needed to supply the demand. Meanwhile, despite rising prices and a shortening in the time it takes to sell houses, homeowners are just not bringing their units on to the market. Right now, the constraining factor in the market is supply, both new and existing, and as long as that persists, prices will rise sharply. The threat that creates is that mortgage rates might actually start rising again. The combination of higher rates and higher prices should ultimately slow down sales, but that is not likely to happen for quite some time. It’s a sellers market and it is likely to remain that way for much of the rest of the year.