Housing markets are reviving, says a new report on state of the nation’s housing from the Joint Center for Housing Studies of Harvard University.

"While still in the early innings of a housing recovery, rental markets have turned the corner, home sales are strengthening, and a floor is beginning to form under home prices," said Eric Belsky, managing director of the JCHS. "With new home inventories at record lows, unless the broader economy goes into a tailspin, stronger sales should further stabilize prices and pave the way for a pickup in single-family housing construction over the course of 2012."

The report points to a steady drumbeat of good news for the market in the first quarter of 2012, with existing home sales up 5.2 percent above last year, new home sales up 16.7 percent after last year’s record lows, inventories down more than 20 percent and single-family new construction starts and permits both up more than 16 percent over last year.

The time is ripening for fence-sitter to take the plunge into ownership, said Belsky. "With rents up, home prices sharply down, and mortgage interest rates at record lows, monthly mortgage costs relative to monthly rents haven’t been this favorable since the early 1970s."

But challenges remain. Stronger job growth is still needed to solidify gains. "The country has seen new household formations fall well below expected long-run rates due to a falloff in young adults being able to move out on their own and a slowdown in net immigration. Even in 2011, fewer than 700,000 households were added and that’s well below the 1.2 million or more annual trend expected under more normal economic conditions," said Chris Herbert, director of research at the Joint Center for Housing Studies.

The report estimates an additional two million homes remain in the foreclosure process, and 11 million owners are underwater. This will provide long-term checks on the market, since without equity many homeowners are unable to afford renovations and repairs that boost construction demand.

And the rise in rents coupled with the inability of many homeowners to refinance, has spurred number of households spending more than half their income on housing to record heights, the report says. Between 2007 and 2010, the number of US households paying more than half of their income for housing spike more than 10 percent, up 2.3 million to a total of 20.2 million.