Its the time of month again to take a snapshot the housing market. Weve got the new data on existing home sales, new home sales and price trends from all of the authorities, with accompanying commentaries.

The month showed strong performance in unit sales and a continued moderating of prices.

The seasonally-adjusted pace of existing home sales topped 6.0 million in October, according to NAR, returning to a level last seen in February 2007. Non-adjusted existing home sales were up 21% over last year.

The increase in sales has helped to drive down inventory to 7.0 months, a 35% decline from the peak levels experienced just over a year ago.

The New Home market also posted between than anticipated results, with a similarly strong drop in inventories.

The increase in velocity of unit sales has contributed to an continued improvement in price strength. The Case-Shiller Home Price Index posted its fourth consecutive monthly gain in September, after 27 consecutive declines.

Altos Research reports a narrowing of the difference between the price of homes being sold and the price of new homes coming onto the market. This trend demonstrates that buyer and seller expectations are coming more into line, creating the context for a more liquid market.

A quick scan of the web shows a broad range of punditry around the state of the home sales market. There are three basic points of view. First, a series of stimuli, including low mortgage rates and government tax breaks, have contributed to false energy in the market. Second, that the continued strain on the job market will drive more foreclosures into the housing market, putting further downward pressure on home prices. And third, that the housing market has found a relative bottom, with a combination of pent-up demand and artificial stimuli giving a shock to a moribund system.

My point of view more closely aligns with the third. Homes are selling. There isnt enough surplus demand to revitalize the construction market. The shadow inventory of bank-owned homes will continue to put downward pressure on prices, contributing to choppy price performance for a couple of years. The natural level of the home sales market, given population and employment dynamics, is somewhere between 5.75 million and 6.25 million units sold a year.