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The housing market got another dose of good news yesterday. 

According to the National Association of REALTORS, the number of homes sold in May increased for the third straight month and the national housing supply fell by 5 months.

Furthermore, first-time home buyers are accounting for nearly one-third of the market activity.

But, before we declare a bottom in housing, it's important that we remember the First Rule of Real Estate:

All Real Estate Is Local

National housing statistics like Existing Home Sales are painted with a very broad brush. They lump disparate locales such as San Francisco and Seattle into one sample set and don't account for regional differences, let alone neighborhood ones.

Furthermore, getting down to a city-by-city, or even street-by-street basis, we can always find homes that are selling quickly and home that are languishing.  Real estate is highly local and subject to countless influences.

That said, the national data isn't completely useless.  From the patterns, we can infer that low mortgage rates, ample home supply and available tax credits are providing a quantifiable boost to the broader real estate market. 

And based on recent pending sales data, we can expect June and July's Existing Home Sales figures to be similarly strong to May.

Therefore, if you're in the market for a new home right now -- or plan to be soon -- be conscious of home inventory levels in your target neighborhoods.  Fewer homes on the market usually means less ability for buyers to negotiate and that leads to higher sales prices. 

Plus, the NAR is reporting buyer activity up 10 percent from last year.

The housing market may not be fully recovered in every housing market just yet, but in studying the data, a lot of the pieces appear to be falling into place.

Mortgage markets improved last week on the heels of benign economic data and a non-inspired press release from the Federal Reserve.

Aside from trader momentum, 3 market-moving events helped set the pace last week:

1. Housing data hinted at strength
2. Jobless data showed softness
3. The Fed said growth appears on-track

The combination of the three created volatility that -- for just the second time in the last 8 weeks -- worked in favor of rate shoppers.

Mortgage rates changed a lot last week, but they trended lower overall.

Already, however, markets are looking ahead to this week's holiday-shortened trading sessions.  There is a ton of data to be released and as the week progresses, the ever-falling market volume could create some wide swings in mortgage rates.

The mystery is whether rates will be getting better or worse.

On Tuesday, markets will get Consumer Confidence and Case-Shiller Index data at 9:00 AM ET.  The Case-Shiller Index is a home price measurement and it always gets a lot of press.  Strength in either number should lead mortgage rates higher.  Weakness should help rates ease.

Then, on Wednesday, Crude Inventories should take the spotlight. Normally, we don't watch this data point too closely but with gas prices easing last week, rising oil supplies could mean even lower gas prices ahead.  This is anti-inflation and a good sign for mortgage rates.

And lastly, on Thursday, the government releases June's jobs report.  This report is always a market-mover -- good or bad.  And with trading volume low by Thursday, mortgage rates should move more than "normal".

Be ready to lock at a moment's notice this week.  Mortgage rates continue to be volatile and the holiday-shortened week won't do anything to counter that.  If you're the nervous type, when you see a rate that fits your budget, consider locking it in.

If you only saw the headlines this week, you may have missed another positive sign in the housing market.

According to the Census Bureau, the supply of newly-built homes for sale fell to 10.2 months in May, its lowest level in 10 months.

Unfortunately, the New Homes Sales story wasn't positioned as a positively by the press.  Instead, the most common headline on the data read "New Home Sales Dip 0.6%" with many journalists referring to the figures as "weak" or "disappointing".

Only, that's not completely true.

See, one of the nice elements of the monthly New Home Sales report is its footnote section in which the Census Bureau talks about statistical Margin of Error and that section tells us that if the Margin of Error is larger than the measurement itself, the report is useless.

And that's exactly what happened in May.

New Home Sales were measured to have fallen by 0.6 percent but that data point was dwarfed by its 17.8 percent Margin of Error,  The "headline data", in other words, was just a guess.

The press reported it anyway.

Nonetheless, as it relates to the economy, falling home inventories are a positive.  Having 10-plus months of homes on the market is still high historically, but a definite improvement over what we saw earlier this year.

So long as low mortgage rates and aggressive pricing persists from builders, we expect even less supply in the months ahead.