Let's call it “the crisis that never was.” We are referring to the mother lode of foreclosures and distressed properties – the shadow inventory – that so many pundits predicted would swamp the real estate market in 2012 and return home prices to a downward trajectory.

That's hardly been the case. RealtyTrac reports that servicers started a few more foreclosures in May than in April, but filings were still 4 percent lower than in May 2011. RealtyTrac goes on to tell us that foreclosure activity has decreased 20-straight months based on year-over-year comparisons.

Yes, foreclosures are still elevated compared to five years ago, but the market continues to handle them in a rational and orderly manner. Short sales have been an attenuating variable. Banks realize they can make more money treating delinquent mortgages with short sales than repossessions. Better pricing is the key variable to making a short sale the superior option. Why take on a home you have to maintain, manage, and market when improved pricing will naturally draw in buyers?

The dearth of inventory (which we discussed last week) is the principal contributor to rising prices. Realtor.com reports that the national inventory of for-sale residential properties is down over 20 percent year-over-year, dropping in 144 of the 146 markets it covers. Over the same period, the median age of inventory has dropped nearly 10 percent, while the median list price has risen over 3 percent.

The recent spike in mortgage purchase applications points to even more inventory contraction and/or higher prices as we head into the summer months. After holding in lackluster territory for much of the spring season, weekly mortgage applications took a huge 13-percent jump, signaling that the summer-selling season might be more brisk than many analysts had expected.

What's more, the composition of those buying into the reduced inventory also points to a healthier market. The more owner-occupied buyers who jump into the pool, the better. The data show that many more owner-occupied buyers have jumped into the pool in recent months.

Buyers of all stripes continue to benefit from an ultra-low lending rate environment. In past issues, we've discussed at length the benefits of financing real estate in a low-rate, low-price environment. In short, the opportunity costs of cash buying is high when mortgage lending rates are low (and vice versa), because the money allocated to the house could have been allocated to other cash-generating investments.

That opportunity cost got a little higher this past week, with rates on most lending products dropping a couple basis points. We don't expect them to move meaningfully higher over the next few weeks. Greece and Spain are still a mess, and now it appears Italy is set to join the fray. That means investors remain risk averse, which means more money flowing into haven securities, including the influential 10-year U.S. Treasury note.

That said, it's important to keep in mind that we have a supply-and-demand issue at work. Demand for mortgage products have spiked in recent weeks, which means processing times could rise. Therefore, it's still prudent for borrowers to get their applications in ASAP. The benefit of waiting for a lending rate five or 10 basis points lower than today's market rate can easily be offset by a home whose price rises or is snapped up by another buyer.

What's more, even though we expect rates to remain low, rates can (and have) turned on a dime.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.