Housing markets are showing signs of reviving, concludes The State of the Nation’s Housing report released by 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,” says Eric S. Belsky, Managing Director of the Joint Center for Housing Studies. “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.”

While gaining ground, the homeowner market still faces a number of challenges, the Harvard report cautions. The backlog of roughly two million homes in the foreclosure process will keep distressed sales elevated and could keep price increases in check in places hardest hit by foreclosures. At the same time, growth may remain muted due to the more than 11 million homeowners who owe more on their mortgages than their homes are worth. These owners cannot sell without incurring a loss and have no home equity to borrow against to fund major remodels.

View the full report here.