The last two years have been rough on housing in a chain reaction-kind of way.

First, mortgage guidelines tightened, preventing some homeowners from ditching onerous ARM products.  That sparked a foreclosure boom that led to large losses on Wall Street.  In turn, it sank the U.S. economy.

Today, as compared to 3 years ago, foreclosures are way up, home values are way down, and mortgage rates are as low as they've ever been. It's wonderful news for home buyers -- there's a plentiful supply of homes and financing is cheap. Home affordability is near all-time highs.

But the market is changing.

Massive, sustained government stimulus has helped reverse the economy's slide.  There's still some rough patches, but overall, prospects look bright for 2010.

In housing, we can already see the improvement:

• The supply of new homes is down 40 percent this year
• The number of existing home sales are soaring in Cincinnati and other markets
• Pending home sales are as high as they've been since 2006

Furthermore, home prices are on the rise in the majority of U.S. markets.

The Buyers Market is over, folks. If you bought a home in February 2009, pat yourself on the back -- you timed the market bottom perfectly.  Both home prices and mortgage rates were troughing that month.  Since then, however, it's been a steady erosion and home seller are psyched about it.

For today's home buyers, mortgage rates remain low and home prices have a lot farther to climb.  Homebuying conditions may not be as perfect as they were 9 months, but, as compared to what we'll see next year, they're pretty excellent.  Especially because mortgage rates will cross 6 percent soon.

You can't lock a mortgage rate before you've found a home, but you can get prequalified and fast-tracked for one. Call or for a rate quote and help with your homebuying.  I answer all of my own emails and my rates are very, very good.

Each month, a real estate trade group publishes the Home Affordability Index, a measurement that accounts for home values, interest rates and family incomes to determine whether housing is getting more -- or less -- affordable for average Americans.

The Home Affordability Index a flawed report for a number of reasons.  For example, the index makes the 3 broad assumptions of:

1. A national median home value despite its complete irrelevance as a metric
2. An average mortgage rate that ignores state rate changes and LLPA differences
3. A national median income that doesn't account for Cost of Living differences

In addition, the index is easily influenced by mortgage rates.

If we account for the 0.75% increase to rates over the last 5 days, the Home Affordability Index falls by 10 points to its lowest levels since December 2008.

Each of these issues undermine the Home Affordability Index's significance to housing.  However, we can't ignore the report entirely because it's a relative finding, measuring change in costs from month-to-month.  As home values have fallen and mortgage rates have, too, both the up-front and on-going costs of homeownership have dropped.  This realization is converting a bevy of long-term renters into first-time homeowners. 

It's also fueling a boom in home sales.

In April, the number of MLS-listed homes that went under contract rose by an astounding 7  percent.  It's the biggest one month jump in Pending Home Sales since October 2001, not coincidentally, the second-to-last month of the Early 2000s Recession.

Now, not every home under contract will make it to the closing table.  It's estimated that only 80 percent of them do.  But with so many potentially sold homes , you can't help but think that the economy is going to get a nice kick in the kiester sometime mid-summer. 

See, when "pending homes" become "sold homes",  things start to happen. 

Moving supplies get ordered; new furniture and appliances get bought; painters and landscapers get hired.  Money gets spent and the economy moves forward.  This is a well-known chain reaction and it's one reason why economists say the economy can't improve until housing improves -- home buyers spend too much money to have it otherwise. 

Traders agree.  The Materials and Consumer Staples sectors were the top two performers on Wall Street Tuesday.

Pending Home Sales are rising and it's a signal of strength.  From the data, we can infer that the number of active homebuyers is higher than in months prior and that will, eventually, create pressure on home prices to rise.  It hasn't happened yet, but when the demand for homes does finally exceed the supply, home values should turnaround in whichever neighborhoods the imbalance occurs.

Meanwhile, so long as mortgage rates remain below 6 percent while the government incents first-time home buyers, that turnaround could happen sooner rather than later.