The housing market has turned—at last.

The U.S. finally has moved beyond attention-grabbing predictions from housing “experts” that housing is bottoming. The numbers are now convincing.

Nearly seven years after the housing bubble burst, most indexes of house prices are bending up. “We finally saw some rising home prices,” S&P’s David Blitzer said a few weeks ago as he reported the first monthly increase in the slow-moving S&P/Case-Shiller house-price data after seven months of declines.

The U.S. finally has moved beyond attention-grabbing predictions from housing “experts” that housing is bottoming. The numbers are now convincing, according to David Wessel on The News Hub. (Photo: Bloomberg News)

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Nearly 10% more existing homes were sold in May than in the same month a year earlier, many purchased by investors who plan to rent them for now and sell them later, an important sign of an inflection point. In something of a surprise, the inventory of existing homes for sale has fallen close to the normal level of six months’ worth despite all the foreclosed homes that lenders own. The fraction of homes that are vacant is at its lowest level since 2006.

The reduced inventory of unsold homes is key, says Mark Fleming, chief economist at CoreLogic, a housing data-analysis firm. For the past couple of years, house prices have risen in the spring and then slumped; the declining supply of houses for sale is reason to believe that won’t happen again this year, he says.

Builders began work on 26% more single-family homes in May 2012 than the depressed levels of May 2011. The stock of unsold newly built homes is back to 2005 levels. In each of the past four quarters, housing construction has added to economic growth. In the first quarter, it accounted for 0.4 percentage points of the meager 1.9% growth rate.

“Even with the overall economy slowing,” Wells Fargo Securities economists said, cautiously, in a note to clients, “the budding recovery in the housing market appears to be gradually gaining momentum.”

Economists aren’t always right, but on this at least they agree: A new Wall Street Journal survey of forecasters found 44 believe the housing market has reached its bottom; only three don’t. (The full results of the Journal’s July survey will be released at 2pm ET)

Housing is still far from healthy despite the Federal Reserve’s efforts to resuscitate it by helping to push mortgage rates to extraordinary lows: 3.62% for a 30-year loan, according to Freddie Mac’s latest survey. Single-family housing starts, though up, remain 60% below the 2002 pre-bubble pace. Americans’ equity in homes is $2 trillion, or 25%, less than it was in 2002 and half what it was at the peak. More than one in every four mortgage borrowers still has a loan bigger than the value of the house, though rising home prices are reducing that fraction slowly.

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Still, the upturn in housing is a milestone, a particularly welcome one amid a distressing dearth of jobs. For some time, housing has been one of the biggest causes of economic weakness. It has now—barely—moved to the plus side. “A little tail wind is a lot better than a headwind,” says economist Chip Case, the “Case” in Case-Shiller.

From here on, housing is unlikely to drag the U.S. economy down further. It will instead reflect the strength or weakness of the overall economy: The more jobs, the more confident Americans are about keeping their jobs, the more they are willing to buy houses. “Manufacturing had led growth and construction had lagged,” JPMorgan Chase economists said last week.”Now the roles are reversed: Manufacturing growth has slowed as private construction comes to life.”

Plenty could go wrong. The biggest threat is a large shadow inventory of unsold homes, homes which owners won’t put on the market because they are underwater, homes that will be foreclosed eventually and homes owned by lenders. They have been trickling onto the market, slowed in part by government efforts to delay foreclosures; a flood could reverse the recent rise in prices. Or the still-dysfunctional mortgage market could get worse. Or overly zealous regulators or a post-election change in government policy could unsettle mortgage lenders or home buyers.

But the housing bust is over.

If you are a first-time home buyer, it may seem like your real estate agent is speaking a foreign language. Before you get too deep in the process, familiarize yourself with some of the lingo. Here are six words to know:

Appraisal: The determination of the worth of something by a professional, in this case the market value of a property. An appraiser uses an analysis of local market data along with the characteristics of the property. Your bank or other lender may refuse to loan you money if the appraisal price is subpar compared to the loan request. A home inspection is not the same as an appraisal.

Closing: The last stage in the transfer of property. The buyer, seller, their attorneys and the settlement agent will meet, usually in a formal setting, to sign some papers and seal the deal. According to the National Association of Exclusive Buyer Agents (NAEBA), this is when the buyer and/or seller will pay the closing costs, which include charges for obtaining the mortgage loan, prepayment of taxes and insurance, and other fees.

Contingency: Conditions that have been built in to a real estate purchase or sale agreement that must be met before the sale can be completed and legally binding. For example, an appraisal contingency would allow the buyer to back out of a contract without penalty if the appraisal price is not enough to secure a mortgage.

“This is by far the most important term or phrase to understand,” says Zachary Schorr, the lead real estate attorney at Los Angeles-based Schorr Law.

Disclosures: The seller is required to provide the buyer with certain information (disclosures). The number and types of disclosures vary by region, but they may include information about conditions affecting the value or enjoyment of the property. The seller may know of an earth-shaking construction project that is about the start around the corner, which would impact the enjoyment of the property.

“While the term ‘disclosure’ is fairly common, the legal effect of these disclosures is important,” Schorr says. “Buyers must read the disclosure statements in great detail.”

A buyer will have a hard time bringing about legal action over a leaky roof if the seller told them about the roof situation in the disclosure statement, Schorr says.

Escrow: Funds, securities or other assets held by a neutral third party (an escrow company or agent) on behalf of the other two parties (in this case the buyer and the seller). The buyer will deposit the payment in an escrow account, proving to the seller that he or she will be able to uphold the other end of the deal. The escrow service will pay the funds to the seller once certain conditions pertaining to the sale have been met.

Mortgage: A loan that helps you purchase your house. You sign a contract promising to pay back the loan with interest over a certain number of years. A mortgage is likely the largest debt you will ever take on, and if you don’t repay it, the lender can take back your property and sell it. The components of your monthly mortgage payments may be referred to as PITI:  principal (the money that goes into paying down the loan), interest (which is paid to the lender for letting you borrow the money), (property) taxes and  (homeowner’s) insurance.

Buying a house and looking for a word that isn’t here? Check out the Federal Trade Commission’s comprehensive glossary of real estate lingo

Negative equity, which is the result of homeowners owing more on their mortgages than their homes are worth, has always been viewed as a detriment to the housing economy because it freezes owners in their homes and makes them liable to foreclosure.

At a panel today at the National Association of Realtors conference, Zillow’s chief economist put a different spin on negative equity.

Stan Humphries argued that current market conditions, when inventories are at record lows and negative equity afflicts 31.4 percent of all homeowners with a mortgage, negative equity is not only diminishing demand it is also further reducing the available supply of homes for sale by making it impossible for owners to sell without taking a loss.

Lower inventories lead to price increases and at some point values rise sufficiently to move number of owners above water, and making it possible for them to sell, resulting in a temporary increase in inventories.  Prices might plateau temporarily until demand reduces inventories again and prices resume their climb.  The result is a “staircase” rather than a “u-shaped” recovery, Humphries said.  This scenario is most likely in middle to lower tiered priced housing markets.

During the panel on the economic outlook, Lawrence Yun from the National Association of Realtors said due to current conditions he has raised his for forecast and expects median prices to rise ten percent on an annual basis a year from now.

Yun said a reduction in distress sale market share from one-third of the market to 15 percent or less has contributed more to increases in median prices and actual appreciation.