JPMorgan Chase (JPM) expects home prices to rise 7% in 2013. That level of continued confidence is driven by tighter-than-normal inventory, robust demand, high affordability levels, and a stronger economy. 

As a result, housing net demand is expected to be slightly higher than 3 million in 2013. Two technical factors supporting such demand include the downward trend in distressed sales and the continuous use of short sales, JPMorgan (JPM) said in its April report.

“However, unemployment is still elevated and we see no signs that lending standards will ease significantly in the near term,” analysts of JPMorgan Chase explained.

With a historically lean inventory, the current housing market is more likely to be a seller’s market compared to a buyer’s market. 

However, previously discouraged sellers could return to take advantage of rising home price thanks to the Federal Housing Finance Agency announcing a new initiative to help streamline modifications for eligible borrowers. 

“Although the size of the eligible universe is relatively small and there is a risk for borrowers who are 30-60 days delinquent to go 90 days delinquent, the new initiative offers servicers of GSE loans another path to handle delinquencies earlier and to avoid foreclosure,” the report noted.

Meanwhile, economists remain bullish on home prices.

The latest Zillow housing survey shows that home prices are expected to increase 4.6% in 2013 and another 4.2% in 2014 before moderating somewhat to annual increases between 3.6% and 3.8% for 2015 through 2017.

Nonetheless, recent housing and economic indicators have posted mixed results.

For instance, housing inventory rose after falling the previous eight months, putting increased pressure on net housing demand.

“While February sales were at the highest level since the payroll tax credit was adopted in November 2009, the reversed trend in inventory kept net demand from gaining further, remaining flat from last month at a 1.7-million level,” the analysts stated. 

While housing transaction traffic remained strong, there was an upward bump in the distressed and investor share of sales.

The median time on the market for all homes was 74 days in February, 24% below 97 days in the same month last year.

For example, one out of three homes sold in February were on market for less than a month, according to JPMorgan.

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