Pending Home Sales recovered by 1% in December after November’s big drop.

A Pending Home Sale is a home under contract, but not yet closed. It’s compiled using over 60 large brokerages and over 100 regional data listing services and is considered to be one of the best indicators of home sales activity.

As such, it’s pretty accurate in projecting forward-looking housing reports.  Notably, with the data showing a moderate tick up on Pending Home Sales in December, it’s reasonable that we should see a tick up in Existing Home Sales in January.

With the first time home buyer tax credit ending soon, FHA interest rates likely to go up, and now housing looking like it is going to resume its upward trend, the time to buy might be now.

For home buyers in Chicago , this is all a bit of good news. Home prices are based on the supply-and-demand balance that exists between buyers and sellers.  When buyers outnumber sellers, like they did through most of 2009, home supplies dip and, in fact, the national home inventory nearly halved during the 12 months ending November 2009.

With fewer homes for sale, multiple-offer situations were almost commonplace and home values rose as result.

Activity has since slowed, however, and fewer buyers are in today’s market. The supply-and-demand equation has shifted back some. In December, home supplies rose for the first time in 7 months and January will likely show the same.

The net result: Home buyers have more homes from which to choose and that can create negotiation leverage for better prices and better concessions.

With mortgage rates still low and a looming deadline on the homebuyer’s tax credit, market activity should be strong between now and April.   Take your time and bid right. And when you’re ready, be ready. The best deals likely won’t last.