Is the housing market on the verge of recovering? Is it recovering already? If you’re not sure whether you believe the economists and pundits who think they can see the future, here are some tools that will help you make up your own mind.

1. Pending home sales

According to the National Association of Realtors, pending home sales, or the number of homes that are under contract and in the process of selling, rose by 8.2% in February (the most recent month for which data are available). The index is also an encouraging 17.3% over what it was a year ago. Pending home sales are considered a leading indicator, meaning that they can forecast the direction in which the economy is headed. Leading indicators cannot truly predict the future, though, so they should be taken with a grain of salt. The increase in pending home sales could be less indicative of a genuine improvement in the housing market, however, and more indicative of the pending expiration of the homebuyer tax credit, which requires homes to be under contract by April 30.

2. Housing starts

Housing starts are an important leading indicator of not just the housing market, but the economy as a whole, because people are more likely to start residential construction projects when things are looking good. Housing starts don’t look promising right –now; the U.S. Census Bureau reported that privately owned housing starts in February were 5.9% below January and 0.2% above February 2009.

3. New and existing-home sales

New home sales reached a record low of 308,000 in February, according to the National Association of Home Builders. In 2005, 1.28 million new homes were sold per month on average. The good news is that new home sales increased by 20.8% in the West, one of the regions hardest hit by the housing crisis. More good news comes from statistics on existing-home sales. About 5 million existing homes were sold in February, up from about 4.7 million a year ago.

4. Home inventory

Home inventory is another leading economic indicator. A greater supply of homes for sale indicates weak market conditions. The NAHB reported that as of February, 236,000 new homes were on the market, a 9.2-month supply and the worst number since May 2009. There was also an 8.6-month supply of existing homes on the market, the worst number since August 2009. However, these numbers are better than those from a year ago, when the supply was 11.1 months for new homes and 9.7 months for existing homes.

5. Housing affordability

The National Association of Realtors reports that in February, the median price of an existing home in the United States was $164,300 and the average mortgage rate was 4.99%. With median family income at $60,498, a family’s housing payment would be only 14.2% of its income, well below the 25% cap that many financial experts recommend for keeping the monthly budget under control. Compare these figures to 2007 averages, when a house cost $217,900, mortgage rates were 6.52% and median incomes were about the same at $61,173. While falling home prices aren’t good, improved home affordability could help the recovery by putting homeownership within reach for more families, especially the first-time buyers who have historically helped end housing slumps. However, credit is still difficult to obtain, and unlike investors, most families can’t buy homes without a mortgage. What’s more, despite how far prices have fallen, plenty of people in high-cost-of-living cities still can’t afford to buy anything.

6. Mortgage applications

The Mortgage Bankers Association’s Weekly Mortgage Applications Survey reports on the number of people applying to borrow money to buy a house. For the week ending April 9, mortgage applications declined by 9.6% over the previous week. The four-week moving average, which is helpful in smoothing out the ups and downs of the weekly figures, was down 6.2%. The MBA stated that an increase in mortgage insurance premiums for Federal Housing Administration loans, which are attractive to buyers because of their low down-payment requirements, may have contributed to this decline.

7. Mortgage interest rates

For the week ending April 9, the MBA reported that the average contract rate on a 30-year fixed-rate mortgage was 5.17%. Mortgage rates have been at historic lows for months, wavering between 5% and 6%. Low mortgage rates help entice buyers, but they can’t fix a bad housing market on their own. The Consumer Confidence Index, a survey of how optimistic or pessimistic people feel about the economy, has been up and down in 2010, and consumers still feel pessimistic about the job market. The thousands of Americans who are unemployed couldn’t get a mortgage even if rates were 1%.

8. Real-estate mutual funds

According to Morningstar, real-estate mutual funds returned 9.4% in the first quarter of 2010, one of the highest returns of any mutual fund category. Over the last year, they have also led all mutual funds, with a gain of 105.3%. Shares of Vanguard’s REIT ETF (VNQ), which invests in a wide range of real-estate companies, gained 10% in the first quarter of 2010 and more than 69% in the last year. These returns show investor confidence in the overall real-estate market.

Mixed signals

Major indicators are giving mixed signals about how the housing market is doing. High unemployment rates, the continued difficulty of obtaining credit and the pending expiration of the homebuyer tax credit make it hard to tell where the housing market is headed. Keep an eye on these indicators and wait for clear and consistent signals to emerge before you consider the housing market to truly be recovering.

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The focus of the U.S. real-estate market lately has been the number of foreclosures and people trying to purchase cheap housing. But Brian Wesbury, chief economist at First Trust Advisors, says that if Americans don’t start focusing on building new houses, the market will have a much bigger problem on its hands. “We need one and a half million houses per year just to keep up with population growth,” Wesbury said in an interview with Steve Forbes. “And then if you throw in, you know, fires and tear-downs and just worn-out properties, we need 1.6 million or more per year. Right now, we’re down to about six and a half, seven months’ inventory whether you look at new homes or existing homes.” Privately owned housing starts in December 2009 were at a seasonally adjusted annual rate of 557,000, according to the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4% less than where it was in November, which had 580,000 housing starts. Housing completion numbers also contribute to this dire picture, with privately owned housing completions reaching a seasonally adjusted annualized rate of 768,000 in December 2009. That was down 11.2% from the 865,000 completions in November and down 25.3% from the 1.03 million completions in December 2008. Some people might shrug these statistics off, considering the number of foreclosures on the market. “Yes there’s foreclosures coming into the market, but we’re only starting right now,” Wesbury says. “… We’re starting one-third of the houses we need just to keep up with population growth, and that can’t last.” There were 315,716 properties last month with foreclosure filings, according to RealtyTrac. These filings include default notices, scheduled auctions and bank repossessions. Though last month’s filings were 15% more than a year ago, they were 10% less than in December. Jason Thomas, chief investment officer for Aspiriant, a California wealth-management firm, says he doesn’t see the foreclosure situation getting better until the labor market picks up. “So many people are getting to a point where they just can’t hold on anymore, and we may see another wave of that if we don’t see a pretty robust turnaround in the labor market,” he says. The unemployment rate is currently 9.7%, down from 10% at the end of 2009, according to the Bureau of Labor Statistics. Thesis Fund Management portfolio manager Stephen Roseman says the likelihood of a housing shortage is slim to none. “You need to have an accurate housing turnover number, and right now we have anything but that,” he says. There is some demand, though, from companies that are scooping up whole floors or housing developments because they have the cash on hand, Roseman says. And for those people who can get a mortgage, homes are very affordable. The median price for U.S. existing single-family homes in metropolitan areas was $173,200 in 2009, according to the National Association of Realtors, compared with $198,100 in 2008. Mortgage rates are also very low. For instance, both JPMorgan Chase and Wells Fargo are offering 30-year fixed mortgages at 5%, and some can be found for a hair less. “A mortgage is not difficult to get if you have the right income stream,” says Margaret Starner, senior vice president for the financial services firm Raymond James. But even if you can get a mortgage, maintaining the income to pay for that mortgage isn’t easy. “There’s a lot of potential problems that can come out if unemployment continues to drag; people deplete their savings and their credit card,” says Michael Ervolini, head of behavioral finance at Cabot Research. “It appears to be more of an income issue than a housing issue that we’re going to be looking at for the next couple of years.”

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