By Jed Kolko, Trulia Chief Economist

One year ago, I wrote: “Even the best possible 2012 won’t get us halfway back toward normal.” That turns out to be true, but barely: the latest Trulia Housing Barometer, for October, showed us that the market is 47 percent back to normal. And this year, we launched the Trulia Price Monitor — which revealed back in March that asking prices were on the rise — one of the earliest indicators of the home-price recovery. All in all, the housing market enters 2013 with strong tailwinds, but that could change.

OUT: Will Home Prices Bottom? IN: Will Inventories Bottom?

The big question this year was whether home prices had finally hit bottom. We now know the answer is a resounding “yes.” Every major index shows asking and sales prices rising in 2012.

The key question in 2013, though, is whether prices will rise enough so that for-sale inventory — which has fallen 43 percent nationally since the summer of 2010 — will hit bottom and start expanding again. The sharp decline in inventory was a necessary correction to the oversupply of homes after the bubble, but now inventory is below normal levels and holding back sales, particularly in California and the rest of the West.

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2013 Housing Market Trends: What Will Be Different Than 2012

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