The National Association of Realtors (NAR) has suffered some ridicule for its perpetually sunny housing forecasts, even while some markets have been drenched in bad news. But the outlook for 2008 is optimistic for several good reasons.

      Lawrence Yun, NAR's chief economist, says the worst part of the credit crunch is over.

      "The unusual mortgage disruptions that peaked in August were clearly seen in lower home sales that were finalized in September and October, so the market was underperforming," he said. "Now that mortgage conditions have improved, some postponed activity should turn up in existing-home sales over the next couple of months, and I expect sales at fairly stable to slightly higher levels."

      NAR's recent Pending Home Sales Index was up slightly -- with two months of consecutive gains in homes under contract, but that's still nearly 25 percent below a year ago.

      Lows are as unsustainable as highs in real estate, and many communities have been low for a long time. Yun is particularly encouraged by a pick up of pending sales in the depressed Northeast.

      Prices are also on the increase in nearly two-thirds of U.S. metro areas, and not just in certain areas of the Sunbelt. Prices are up in Gary, Indiana, Binghamton, New York, and Spokane, Washington, as well as Corpus Christi, Texas.

      "We can't emphasize enough how much local conditions vary, even within a given area, so it's important for consumers to make decisions based on local market conditions," says Yun.

      Two factors that may impact housing in many areas are not so positive -- jobs and interest rates. NAR expects jobless claims to rise to 5 percent next year, up from 4.5 percent. Mortgage interest rates will go back to 6.5 percent, but let's remember that is still near historical lows. Inflation will rise, but only slightly and will remain under 3 percent.

      So, the housing recovery will be gradual. Existing home sales for 2008 will be under 1 million.