The National Association of Realtors has its tally for 2007. While it was the fifth highest sales on record, 2007 also was the first in over 40 years that home prices and sales went down instead of up.

Does that mean housing's in for a rough winter? Maybe not. Sometimes bad news can be good.

Home sales slipped 2.2 percent in December, bringing the total number of transactions in 2007 to 12.8 percent (5,652,000) below 2006 (6,478,000.)

One reason was that mortgage interest rates were much higher for non-conforming loans such as the jumbo market. That impacted homes over $500,000 which dropped to 12.4 percent of all transactions from 14.2 percent in 2006.

What that means is lower-priced markets and homes were better able to hold the line on prices. In fact, for all of 2007, home values went down only 1.4 percent to $218,900 from $221,900 in 2006. That's a difference of $3,000.

But here's an interesting contradiction. Total housing inventory fell 7.4 percent at the end of December to 3.91 million existing homes available for sale, which represents a 9.6-month supply at the current sales pace. That's down from a 10.1-month supply in November.

How can you have falling sales and reduced inventories at the same time?

Housing sales typically fall in December, but this time, the answer is interest rates. Rates on conventional loans began a significant drop in December. When rates go down there is typically a burst of refinancing activity and purchase applications. Refinancings went up every week in December as interest rates dropped, taking a number of homes for sale or potentially for sale, off the market.

Here are two reasons why Realty Times predicts an active first quarter for housing.

Since conventional rates may not have much further to slide, mortgage activity will increase significantly. Mortgage interest rates have already dropped over 3/4 of a point, which is equivalent to about $150 or more in monthly payments for most conventional homeowners.

Meanwhile, renting is becoming less attractive. According to Realty DataTrust, the average nationwide apartment rent increased 1.9% in 2007 and vacancies decreased.

Higher rents, lower interest rates, and lower housing inventories will convince buyers it's time to act.

Published: January 25, 2008

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.