Homes are spending less time on the market. A year ago, the median time it took a house to sell was 96 days. Now the median time has been shortened to just 71 days. A shortage of inventory, an increase in demand, and those ever-favorable mortgage rates are turning the market around.

Homebuilder optimism is up. The National Association of Home Builders/Wells Fargo Housing Market Index measures the optimism of builders in regards to the newly-built, single-family home market. In November, the index rose five points to 46. This is the highest the index has reached since May 2006, and it is far above the November 2011 index level of 19. With fewer foreclosures and deeply-discounted short sales on the market―accounting for 24 percent of October sales, down four percent from a year ago—builders are seeing an increased demand from buyers for newly-built homes.

Existing home sales increased. Buyers aren't just looking at new homes; more contracts are being signed on existing homes, as well. The Pending Home Sales Index (PHSI), a measure of housing contract activity for existing homes and condos, rose 5.2 percent in October to 104.8. This is a 13.2 percent jump from levels posted a year ago when the index reached 92.6, and it marks the highest level the index has reached since March 2007. The PHSI has risen for 18 consecutive months, but not every region of the country is seeing that much activity. While the index rose significantly in the Midwest and the South, the Northeast slipped 0.1 percent and the West dropped 1.1 percent. Both regions, however, are performing better than they were a year ago, with the Northeast 13.3 percent and the West 0.9 percent higher than they were in October 2011. The number of total existing-home sales, meanwhile, rose to a seasonally adjusted annual rate of 4.79 million, up 2.1 percent from September and 10.9 percent from last year.

Mortgage rates are still at record lows. Many of these buyers are taking advantage of favorable housing affordability conditions. They might be entering the housing market at just the right time. Though mortgage rates are still at or near record lows, rising inflation rates in the coming years are expected to lead to a mortgage rate increase.

National home prices are rising. In October, the national median existing-home price reached $178,600, 11.1 percent above last year's median price. According to economists at the National Association of Realtors, rising home prices have led to a $760 billion growth in home equity in 2012.

Home prices are climbing in part because inventory supplies are dropping. At the end of October, the total housing inventory fell 1.4 percent to a 5.4 month supply at the current sales pace. This is the lowest the national housing inventory has dropped since February 2006.