There was little to dislike about housing and the mortgage market this past week.

First, the former: Home prices continue to trend higher, as they've been trending for the past 12 months. S&P Case-Shiller reports that prices were up a very stout 0.9% in December for the 20 cities it covers. The year-over-year increase in the index closed at 6.9% for 2012, the highest increase since 2006.

New home sales also continue to adhere to an upward trajectory. Sales surged 15.6% to an annualized rate of 437,000 units in January, which easily beat the consensus estimate for 385,000 units. What's more, sales could have been higher. Like with existing homes, lack of inventory appears to be retarding new-home sales growth. Monthly supply fell to 4.9 months at the current sales pace from 5.6 months in December.

We're interested to see if existing home sales gain traction in coming months. It's no secret that inventory is scarce and sales are increasingly draining what inventory there is. That said, the pending home sales index points to higher sales, given that the number of contracts signed to purchase an existing home jumped 4.5% for February.

The most encouraging news of the week, though, centered on equity. Zillow finds that fewer homeowners owe more on their mortgage than their homes are worth. What's more, the improvement is significant. Zillow reports that two million borrowers were lifted above water in 2012. Looking at 2013, Zillow expects another million borrowers will find themselves above water by year's end.

This is obviously good news for the market. More homeowners with positive equity means more homes will be put up for sale, thus helping to alleviate the inventory shortage. The key to maintaining this important trend is continued job growth and a continued rise in home prices.

There is one trend that wasn't adhered to this past week, and that's the trend in rising mortgage rates. In fact, mortgage rates across most products actually reversed course, offering borrowers a chance to lock in at a significantly lower rate.

Low mortgage rates, low housing inventory, and high affordability means the trend in buyer demand will remain strong. In fact, we expect the demand trend to last through the year. Of course, it's worth keeping in mind that more demand will continue to keep prices adhering to their trend as well.

 Courtesy of Jessica Regan.

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