Home buyers who want a bargain may want to act now because the housing market is in the midst of a turnaround, economists say.

Home prices have fallen and mortgage rates are hovering near record lows, pushing home affordability for the average family to record highs. Meanwhile, rents have been on the rise, making owning a home cheaper than renting in most areas of the country, according to recent surveys. 

But the housing deals aren’t expected to stick around much longer.

An improving job market, a decrease in the number of home owners falling behind on their mortgage, and an anticipated improvement in access to mortgages is expected to help home prices start bouncing back by next year, economists say. 

Investors eyeing profits in rentals also have been snapping up bank-owned properties, which Clear Capital’s Alex Villacorte attributes as helping to lead to an increase in prices on foreclosed properties. This “could have a significant impact on the market overall in terms of providing a rising floor to home values,” Villacorte told CNNMoney.

Some areas are already seeing prices rise. In Phoenix, housing prices have already increased 8.4 percent during the three months ending April 30, and Miami saw prices bump up 4.6 percent quarter over quarter, according to Clear Capital data.

“Stuff I was selling six months ago for $60,000 to $80,000 is now $90,000 to $110,000,” Tanya Marchiol, founder of Team Investments in Phoenix, told CNNMoney.

Loan Rates, Demand Predictions

Buyers may want to act more quickly because mortgage rates are expected to tick up slightly by the end of the year. The increase is being sparked by greater demand, says Doug Lebda, CEO of LendingTree. He predicts 30-year fixed-rate mortgages will inch up to 4.5 percent by the end of the year, which is still low, however, by historical standards. 

The Mortgage Bankers Association is also predicting a big leap in mortgage loans next year. For this year, MBA estimates that buyers will take out loans totaling about $415 billion, but by 2013 that number is expected to nearly double to $706 billion.  

JPMorgan Chase ($42.85 0%) completed short sales on 61% of its delinquent mortgage liquidations in 2011, the most of any servicer, according to data compiled by the bank’s securities research group.

As the robo-signing freeze put a hold on the foreclosure process, the largest servicers turned to short sales over REO. By the end of last year, servicers were completing short sales on more than half of their inventory of home loans more than 60 days delinquent or in foreclosure, according to the report. In 2008, short sales took roughly 25% of all liquidations.

According to Chase analysts, short selling a property resulted in an average 56% loss on the loan, roughly 15% lower than an REO sale.

A recent story in Bloomberg detailed how short sales peaked even as a percentage of overall home sales in January.

Analysts at Chase, using the same Lender Processing Services ($25.49 0%) data, broke down which servicers were doing the most.

Following Chase, Bank of America ($8.18 0%) completed short sales on 52% of its liquidations. Ally Financial and Wells Fargo ($33.04 0.35%) both did short sales on more than 41% of their resolutions.

Even firms not involved in the robo-signing investigation from the attorneys general turned to short sales. While still under Goldman Sachs ($112.78 1.03%) ownership, 43% of Litton Loan Servicing liquidations were short sales, followed by 43% at IndyMac and 39% of American Home Mortgage Servicing, according to the report.

Ocwen Financial Services ($14.71 0%) used short sales the least, completing them on roughly 25% liquidations, because the company was geared more toward modificaitons and REO, according to the analysts.

Fannie Mae and Freddie Mac will hold servicers to stricter short sale timelines beginning in June. The AGs and federal prosecutors installed similar short sale standards in the $25 billion foreclosure settlement as well. A recent report from RealtyTrac showed 2012 could lead to even more short sales.

Chase analysts project servicers will have to liquidate roughly 2 million loans either through short sale or REO every year for the foreseeable future.

“Given that liquidation is inevitable for so many borrowers, investors in distressed assets should look to servicers who are more aggressive about pursuing short sales, where severities are lower,” analysts said in the report. “In general, there has been a trend of increasing short sales, and the percentage of all liquidations that goes through short sales is over 45% now.”

About 20 California congressional lawmakers have joined forces to urge the Federal Housing Finance Agency to not conduct an REO pilot program in the state, arguing that it would harm the state’s housing recovery.

The lawmakers sent a letter to FHFA Acting Director Edward DeMarco saying such a program would increase the losses to taxpayers and the government-sponsored enterprises. 

The FHFA launched an REO sales program in February, in an attempt to unload the high inventory of foreclosures held by Fannie Mae and Freddie Mac through bulk sales to investors. California holds the highest number of Fannie Mae’s REO inventory, with nearly a quarter of its REOs located in that state alone. 

The California Association of REALTORS® applauded the lawmakers for speaking out against REO sales program. CAR has been a critic of the program, saying that housing inventory in the state is very low and demand is high. Such a program would do more harm than good, the association argues. According to CAR, REO homes have been attracting multiple offers and are closing in less than 60 days on average, and often above the list price. CAR officials argue a government intervention is not needed. 

“Carrying out this plan in California would potentially further delay a housing recovery and ultimately result in greater losses for the taxpayer,” says CAR President LeFrancis Arnold